Businesses welcome budget 2011-12

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NEW DELHI, Mar 1, (AFP): India's finance minister warned Tuesday the country could not afford to be complacent about its growth prospects in the face of fragile global recovery and domestic challenges such as high inflation. Pranab Mukherjee's warning came a day after he presented a populist budget in which he forecast that Asia's third-largest economy could grow by nine per cent in the financial year, starting April 01. Mukherjee said India's economy had proved "remarkably resilient to external shocks" but added "we cannot afford to be complacent" about growth. General inflation is running at over eight per cent, while food inflation stands at nearly 11.5 per cent, causing hardship to the hundreds of millions of poor who are the ruling Congress party's core supporters. Mukherjee added that he feared Europe's debt crisis could spread to other countries in the continent amid mounting pressure on Portugal to seek an international bailout like Greece and Ireland. "I am not confident from the recent G20 finance meeting that the European sovereign debt crisis will be contained," he told a business audience in New Delhi, adding he was worried it could "impact other European countries and lead to another crisis". "Frankly speaking, there is a question mark" about the debt crisis, said Mukherjee, who attended the Group of Twenty (G20) meeting of the world's biggest wealthy and emerging market nations in Paris last month. Mukherjee pledged India would narrow its budget deficit to 4.6 per cent in the coming year from 5.1 per cent currently, saying the gap in the nation's finances resulting from stimulus spending to shelter the economy from the global financial slump was "unsustainable". His budget won plaudits from economists for seeking to cap the deficit but some questioned whether the country would be able to meet the ambitious target set in the budget. "While we applaud the lower deficit target, we believe the actual deficit will turn out higher than budgeted with revenue forecasts too optimistic," said HSBC's chief India economist Leif Lybecker Eskesen. Indian newspaper The Hindu said Mukherjee had played safe in his budget by hiking social spending by nearly a fifth and avoiding contentious economic reforms ahead of five state elections this year. Meanwhile, another wire service report adds: Assurance to roll out the much-awaited Goods and Services Tax (GST), higher export duty on iron ore, foreign investment in equity mutual funds -- the budget proposals have been welcomed by India Inc though some said the service tax on hospitals and hotels would add to the costs. Some of the reactions to the general budget presented by Finance Minister Pranab Mukherjee in the Lok Sabha last Monday were: Sanjay Chandra, managing director Unitech Ltd: We welcome the measures announced in the budget to promote the development of affordable housing. Measures such as expanding the coverage of interest subvention to a loan of Rs. 1.5 million (15 lakh) for a house costing Rs. 2.5 million (25 lakh), providing 100 per cent deduction in respect of capital expenditure incurred on development of affordable housing, will certainly aid in boosting the demand and development of affordable housing in the coming months. Adi Godrej, chairman of Godrej Group: The most important thing is that he (Pranab Mukherjee) has clearly given a signal of GST (Goods and Services Tax) coming through soon. That is a major development which is very welcome as it will help solve a lot of macroeconomic issues, including inflation, fiscal deficit and help GDP growth. Naina Lal Kidwai, country head of HSBC group in India: The government borrowing is slightly at a level lower than what the markets had expected at Rs. 3450 billion (345,000 crore). A number of the steps that have been taken to put money into the hands of the people in the lower income brackets is a very favourable stand. C.S. Verma, chairman of Steel Authority of India (SAIL): Higher export duty on iron ore has been a long pending demand of the steel industry and the budget has taken care of the issue by increasing the export duty to 20 per cent. This should ensure higher availability of iron ore for the Indian steel industry. Madhu Kela, chief investment strategist of Reliance Capital: Foreign investment in equity mutual funds is a big positive for the market.