AgVoice | It's necessary to have attractive FDI policies: IDBI Federal's Aneesh Srivastav

The Union Budget 2011 would be presented on the back drop of rising inflation, high current & fiscal deficit and slowing down growth. This makes the budget exercise much more complicated. Current year's budget would be carefully watched for key policy announcements & government's approach towards a fiscal consolidation.

Expectations on Policies

Inflation

India had budgeted for Rs.1,16,000 cr for subsidies, but the actual subsidies are expected to cross 1,65,000 cr. The approach of the government towards subsidies is important to rationalize consumption and control the fiscal deficit. Implementation of food subsidies policies targeted towards the poor needs attention. Nature & form of Food Security Bill would determine the exact amount required for the same. There is a possibility of additional grant of Rs.25,000 to Rs.40,000 cr required for the same, although the same may not be appreciated by markets.

Farm gate prices of urea should be partly decontrolled and producers should be provided import based price. At the same time, since India imports large amount of urea, it has become necessary to provide schemes to promote investment in this sector.

It would be difficult to do away with oil subsidies, given high crude prices and cascading impact of the same on inflation, but reduction of import duty & excise duty on crude & oil products is not ruled out.

Infrastructure Sector

To handle current account deficit it is necessary to give boost to certain sectors and at the same time it is necessary to have attractive FDI policies to finance trade deficit. Relaxation of FDI limits in insurance & retail sector would be a welcome move.

Expectations on Fiscal Consolidation

Overall, Fiscal deficit of less than 4.8% with targeted GDP growth of 8.5% & net government borrowing of less than Rs.3,50,000 crores would bring smile on investors' face. | By Aneesh Srivastava, Chief Investment Officer, IDBI Federal Life Insurance Company Limited