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Corporate America goes ga-ga over India Budget

Last updated on: March 1, 2011 10:28 IST

Corporate America goes ga-ga over India Budget

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Aziz Haniffa in Washington DC


Corporate America has showered kudos on Finance Minister Pranab Mukherjee for his latest Budget, describing it as a 'very forward-looking confident budget'.

Ron Somers, president of the US-India Business Council, which represents nearly 400 American large and small corporate entities, lauded Mukherjee's budget announcements, saying it sets forth clear parameters that will spur and sustain greater investment in the country's infrastructure sector.

"The sheer confidence this Budget represents is worthy of our praise," Somers said.

In his Budget address, the finance minister outlined proposals that will favourably support greater impetus to invest in the 'India opportunity'. Mukherjee also prioritised infrastructure development, approving $6 billion in tax-free bonds by his ministry as well as floating the prospect for establishment of a major infrastructure debt fund, which will be benefited by the creation of a deeper corporate bond market.

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Image: USIBC president Ron Somers.
Photographs: Paresh Gandhi/Rediff.com
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The USIBC also praised the liberalisation toward foreign institutional investment in equity mutual funds.

Somers said, "The opening of the mutual fund industry to foreign institutional investors is a step that will serve to mobilise significant amounts of capital and expertise in India's financial markets."

He declared, "This change, along with the raised FII investment limits in some infrastructure bonds and strides leading to a predictable and streamlined investment tax regime, will ultimately bolster India's efforts to build-out the country's infrastructure," and added, "US industry stands ready to be full participants in this activity."

Somers also said that American firms read as a favourable indicator the Government of India's stated goal to eliminate bottlenecks in the country's food distribution system, which may hint at a soon-to-be-announced opening of the country's multi-brand retail sector.

India is currently battling major food price-rise and inflation and these twin challenges can be addressed by improving efficiencies in the farm-to-market supply chain which will be benefited by inviting into this sector both technology and investment, he argued.

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Photographs: Reuters
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"The beneficiaries of modern retail, resulting from improved access to food distribution outlets, will be farmers," Somers said, and noted that Mukherjee had pointed out in his budget remarks "the massive inefficiencies in India's agricultural supply chains, whose high cost hurts rural farmers most."

Somers said, "India's next green revolution, spawned by the greater efficiencies in the country's farm-to-market supply chain that will be brought to bear by the entry of organised players in this sector, is a 'game changer' that will benefit the millions of Indians who make their living in the rural agricultural sector."

In addition to the 'hard' and 'soft' financial infrastructure attributes of the budget, combined with the prospect of the opening India's multi-brand retail sector, Somers said, America Inc also was heartened by India's signal to enhance spending in the defence and security sectors.

India has embarked over the next year on a $46-billion upgrade of its military and American firms are eager to partner with Indian counterparts to bring 'best technology' to India's armed forces and security establishment, he said.

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Photographs: Reuters
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In an interview with rediff.com, Somers said, "The very fact that the budget is as forward looking and confident is worthy of praise and boosts investor confidence."

"In other words, India is growing at 8 to per cent GDP and the government is attacking the overhang problems," he said, pointing in particular that "the government has addressed inflation in this budget and that it is going to be brought under control."

Somers reiterated that the "huge emphasis on infrastructure as well as the development of corporate bond markets in India in another manifestation of this confidence and of course I sense the opening up of the retail sector when the finance minister talks about removing bottlenecks in farm to market supply chains."

"So there are a number of positive indicators that gives investors confidence in the United States that India is absolutely open for business," he said, and added, "I can't but continue to stress that we see it as a very forward-leaning confident budget. So, we are very delighted that the budget has come out as it has."

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Photographs: Reuters
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Somers however said, "Where I have some concerns is about what happens if the Middle East continues to remain in turmoil and the price of oil goes beyond $100 per barrel."

"India being 70 percent dependent on hydrocarbons, such a price hike would have a direct impact on prices of fertilizer and there inflation. So, this is a cause of concern as to what happens if there is such a oil price increase because I don't see anything built into the budget in case of such an eventuality.

Somers said, "So let's cross our fingers that the Middle East (West Asia) doesn't result in turmoil and that oil remains below $100 a barrel and that the country continues to gallop forward at 8 to 9 per cent GDP."

"But overall," he said, "We are very pleased with the positive, confident budget that the finance minister has presented and American industry very much appreciates the tremendous leadership on his part which has certainly boosted investor confidence."


Photographs: Reuters
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