India eyes more private investment via fiscal consolidation

Indian government pushes ahead fiscal consolidation and refrains from rolling back central excise duty to pre-crisis levels in a bid to have more private investment, said a top Indian official Sunday.

The first objective of Indian budget proposals for fiscal year 2011-2012 starting from April 2011 is to bring about a stronger fiscal consolidation to enlarge the resource space for private enterprises, said Finance Minister Pranab Mukherjee.

Speaking at a post-budget conference by industrial organization ASSOCHAM, Mukherjee said the swift and broad-based economic growth in fiscal year 2010-2011, exceptional growth of tax revenue, strong export rebound and lower-than-expected current account deficit gave him confidence to effect a sharper fiscal consolidation.

India has brought down fiscal deficit to 5.1 percent of GDP in 2010-2011 and plans further cut it to 4.6 percent of GDP in 2011- 2012, according to latest budget proposals announced at the end of February.

Mukherjee said the lower 3.43 trillion rupees of governmental borrowing from the market in the coming fiscal year should give necessary space for growth in private investments.

India also aims to attract and leverage private investment in infrastructure to power sustainable growth in the medium term, according to Mukherjee.

To this end, India raised investment limits in corporate bonds by foreign institutional investors to 40 billion U.S. dollars from 20 billion U.S. dollars.

India also announced the establishment of special vehicles in the form of notified infrastructure debt funds with tax concessions.

The share of gross fixed capital formation has declined to 27.3 percent in the last quarter of 2010 from 32.6 percent in the second quarter of 2010 with the share of both governmental and private consumption on the rise.

Meanwhile, Indian capital goods sector has showed volatility and weak even negative contribution to the growth of industrial production within last few months.

Indian fiscal deficit shot up to 6.2 percent and 6.6 percent of GDP in 2008-2009 and 2009-2010 due to governmental stimuli package to combat world financial crisis.

Source: Xinhua

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