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Laloo's Railway Budget to be gauge of fiscal prudence
Investors will watch Railway Budget for signs of fiscal profligacy as they gauge policies of the new Govt.
Investors will watch the Railway Budget on Tuesday for signs of fiscal profligacy or prudence as they gauge the policies of a new Government that will deliver its Budget on Thursday.
Railways Minister Laloo Prasad Yadav may introduce a string of new trains and keep lower class passenger fares unchanged but is likely to raise fares for luxury travel, analysts said.
Traders are also concerned over a likely increase in freight rates in the Railway Budget.
"The impression that it might be a populist Budget may not be fully correct. The Railway Budget is likely to be more realistic and fiscally prudent," said president of private economic think tank RPG Foundation, DH Pai Panandikar.
"They know the importance of a balanced Budget, not only of the Railways but the Union Budget as well."
Investors and financial markets will look to the Railways Budget for clues on the policies of the new Congress-led Government when it unveils its first Union Budget.
The Railway Budget will also be a pointer to how much influence the Communists have on economic policies in Asia's third-largest economy, where disenchanted rural voters threw out the previous Government.
India has one of the world's largest railway networks which is also the world's largest single employer. It accounts for about three per cent of Government spending.
But the network that ferries more than 13 million passengers a day is saddled with huge losses because of its rock-bottom fares and bloated workforce, which leave little money for investment in any improvements.
Traders say any increase in freight rates would push up domestic prices and hurt the key cement and steel sectors which have soared recently on an upswing in construction activity.
"A modest increase is priced in, but if the hike is substantial then we could see some impact on commodities stocks," said director at DH Securities, Ketan Jhaveri.
Financial markets have been worried about the influence of the Communists in the new Government and fear there may be a slowdown in tough economic reforms to sustain growth at seven-eight per cent to cut mass poverty.
The new Government has vowed to boost healthcare and education spending to as much as nine per cent of gross domestic product (GDP) from less than one per cent as it launches what it calls "reforms with a human face".
