Indian Union Budget

Asia Society's Indian budget panel on July 8, 2009.
NEW YORK, July 8, 2009—Two days after India’s highly anticipated annual budget was unveiled, analysts offered an audience of eager investors and academics an optimistic look at the nation’s economic prospects but expressed some doubts.

“India is now one of the bright spots in a bleak economic landscape,” said Arun Kumar, partner at KPMG’s US-India practice, who moderated the discussion.

Dr. A.M. Gondane, Deputy Consul General of India in New York, said the budget “was a deliberate attempt on the part of the government to boost private consumption, which had come down precipitously.” He said the budget was just one of the many ways reforms could place under the new government.

K.R. Garish, partner at KPMG India Tax & Regulatory Services, expressed concern over a projected fiscal-year interest burden of 22 percent but praised efforts toward initiating a Goods and Services Tax (GST).

While admitting several challenges, Lalit Ahluwalia, CFO of Ranbaxy North America, agreed initiatives such as a GST, taxes on coal gas chains, and infrastructure expansion would all benefit corporations looking to invest in India.

T.N. Srinivasan, economics professor at Yale University, was more critical. “I am not persuaded that given the difference in India’s economic structure that this is the way to go,” he said. “China’s fiscal situation is far better.”

He said the budget lacked innovation and that more long-term attention needs to be paid to land reform and labor-intensive manufacturing.

Like Srinivasan, Parag Saxena, CEO of New Silk Road Partners, had hoped that several of the budget's proposals would have gone further, citing weaknesses in educational infrastructure, dispute resolution, and mechanisms for aiding enforcement.

Saxena said the budget left one critical question unanswered: “How are we going to pay for this?”

Reported by Zach Balin