By most accounts, the forthcoming Budget would be a populist one. But to attract investment in some crucial sectors like food processing, bio-fuels, higher education, steel, financial services and real estate, the government should provide motivation through continuing reforms and increased outlay, besides giving an assurance that it would take necessary steps to maintain an over 9% GDP growth in the coming years.
The agriculture sector grew by just 2.6% in 2007-08, down from last year?s 3.8%. If the government has to achieve its 4% agriculture growth target, it needs to focus on the food processing sector.
The country?s processed food consumption is estimated at Rs 4.6 lakh crore and the food processing industry is expected to record an over 10% growth. The sector also provides direct employment to 13 million people, which is expected to touch 30 million by 2015. The indirect employment generated is 2.4 times of the direct employment figures.
However, a major challenge is the lack of cold chain infrastructure. The government would do well to encourage private investment in the sector by giving infrastructure status to cold chain establishments, according to industry chamber Ficci.
Higher education is an area crying for reforms and increased outlay. India has one of the world?s largest higher education system with 16,885 colleges, 99.54 lakh students and 4.57 lakh teachers. But the g ross enrolment ratio for the elementary stage of education in 2003-04 was 85%, while the same for secondary and tertiary stages were 39% and 9% respectively.
Charu Modi Bhartia, CEO, Modi Apollo International Institute said the government should allow private sector participation for better access and quality. Investors and institutes from EU and the US are waiting to enter India, she added. Bhartia said sectors including construction, insurance and healthcare are facing a skilled manpower shortage. This can only be met through increasing the number of vocational institutes, for which greater outlay and private investment is needed.
On the financial sector front, 2008 is expected to be a volatile year for stock markets across the globe. But industry experts said if the government can promise of an over 8% growth, it will encourage more funds into the country. ?There will be increased inflow of funds if there is no increase in capital gains tax and securities transaction tax,? said S Naganath, president and chief investment officer of DSP Merrill Lynch.
Bankers said their sector should be made on par with mutual funds whose returns are tax-free. They also want the government to make the cash reserve ratio (CRR) interest bearing. The sector is looking at getting special incentives for financing infrastructure projects and a relaxation in the restrictions on raising cheap funds from abroad to lend to productive sectors.
Steel sector is another one at cross-roads. Faced with rising raw materials cost, the industry could pass it on to the end-users and thereby contributing to inflation. Virendra Joshi, p resident, marketing ( strategy planning and services ) Ispat Industries said ?a ny substantial cut in excise duty from the present high level of 16% will not only help in controlling inflation, but will also ensure that the growth is not hurt from a long-term perspective.? Industry bodies have called for an increase in export duties on iron ore, keeping in mind the increasing domestic demand in the steel sector. India?s iron ore production in 2006-07 was around 160 million tones, of which approximately 95 million tones was exported. However, the domestic steel consumption has shown a 12% growth and would grow to around 16% in the coming years. But the production has grown only by 6.6% in this April-December period, leading to a 67% rise in imports.
At a time when energy security and climate change are becoming more important than ever, bio-fuels sector is one which is coming into limelight. The sector can also be a crucial link between agriculture and industry. According to CII, it is important to accord the ?declared goods? status to ?biofuels? to ensure a uniform 4% sales tax on it across the country and facilitate in bettering the commercial viability. Biofuels units should also be entitle to waiver of stamp duty and registration fees. The government should also offer land at concessional rates to Centres of Excellence in Biofuels sector.
Real estate sector is one which is not expecting any sops. But the government would score ballot points if it were to come up with infrastructure augmentation schemes leading to the creation of affordable housing, said sector expert Ankur Srivastava.
