Budget 2014 must address issues like high subsidies, infrastructure concerns: Arvind Mahajan

The Economic Survey for 2013-14, which broadly outlines the state of the economy was tabled by the Union Finance Minister Arun Jaitley today. The survey, which forecasts a GDP growth of 5.4-5.9% for FY15, also prescribes policy measures by the Modi governemnt to help revive the floundering economy.

Sharing his views on the survey, in this connection, Arvind Mahajan, Partner and Head, Infrastructure and Government Services, KPMG in India, listed some of measures that can be taken by the governemnt in the Union Budget slated for tomorrow.

There is a need for a reverse decline in India's investment rate, for which policy certainty required, Mahajan said, stressing on an end to retroactive taxation for this purpose.

Noting that subsidies have ballooned to 2.44% of GDP from 1.5% in 2008-9, Mahajan advised a cut in subsidies and providing direct benefit transfers to weaker sections and energy pricing reform as being critical, in this regard.

Addressing problems of infrastructure sector should be another key focus of the government in the Budget, according to Mahajan.

"There is deep financial stress in the system with developers balance sheet being stretched, inability to raise debt, and large projects becoming potential NPAs. These assets may become stranded if no concrete step is taken to address the situation," he said.

Mahajan feels that there is need to provide some dispensation, relaxation for classification of NPAs, and/or redoing the classification post take over by a new management; provide an institutional response to deal with renegotiation of contracts, concession agreements post changes due to unforeseen situations. This, he said would help provide life to many stranded projects.

The fuel issue for the power sector also has to be addressed in the Budget, Mahajan said, for which he prescribed a rationalization of coal linkages and noted that a KPMG study shows that savings could touch Rs 5000 crore plus, besides freeing up scarce rail capacity.