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Analysts welcome Rail Budget, but frown at missing details

July 09, 2014 17:19 IST

Sadananda GowdaRating agencies and analysts on Wednesday welcomed Railway Minister Sadananda Gowda's maiden Budget for not being populist, but raised some reservations on implementation and lack of clarity on funding side.

"While the Railway Budget talks about trying to be the largest freight carrier globally and identifies alternative funding requirements to achieve this target, it does not state a clear strategy to meet these requirements," India Ratings said in a note on Wednesday.

It is a Budget ‘high on promises but low on design,’ the agency said.

It acknowledged that Gowda has presented alternative ways of financing like public private partnerships and allowing foreign direct investment in almost all the sectors of the railways, barring direct operations.

Analysts at the brokerage firm Bank of America Merill Lynch said implementation holds the key to the promises made during the Budget.

Its peer, Nomura welcomed the Budget, calling it ‘sensible’ which ‘steered clear of unnecessary populism.’

Gowda's focus on bettering operational efficiency, greater use of technology and encouraging private sector participation for railway infrastructure are welcome, it said.

"The Budget is short on specifics, but the steps are in the right direction," Nomura added.

Domestic rating agency Care hinted at the threat of fuelling inflation because of the 6.5 per cent increase in the freight rates announced on the rail network.

However, with food inflation being a cause of concern, India Ratings said the proposal to have more refrigerated wagons for milk and fruits will help check price rise.

"The government has decided not to go the populist way but to restore credibility with tight discipline on execution," the economic research department of the country's largest lender State Bank said, welcoming the initiatives around passenger safety and amenities.

Having already effected a steep 14.2 per cent hike in June, the railway budget which was presented on Tuesday spared passengers of any fresh revision in fares and freight rates, but pitched for reforms by proposing private and foreign direct investment and public private partnership to meet the resource crunch.

Presenting his maiden budget, Gowda said he plans to leverage railway PSU resources by bringing in their investible funds in infrastructure projects.

Image: Railway Minister Sadananda Gowda; Photograph: Reuters

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