Budget 2011: FII investment in infrastructure is a bit of a letdown

What it means for the economy

Financial Reforms Get Going

A big push for financial sector reforms, on hold for the last 6 years. Laws to raise overseas investment in insurance to 49% from 26%, hike the share capital of India’s largest life insurer, LIC, from Rs Rs Rs Rs 5 crore to Rs 100 crore are on the anvil. So are two new Bills to create a pension fund regulator and to reform archaic banking laws. Intentions are fine, but will the government have the majority in the Rajya Sabha to push these reforms through?

Divestment to Boost Revenue

The exchequer will end up with Rs 22,144 crore after selling stakes in PSUs this fiscal. While stake sales in ONGC and SAIL could happen this year, the proceeds from the SAIL sale could go on the government’s books next year. Next year’s target is Rs 40,000 crore, with stakes of several PSUs including PFC on the block. If successful, these sales could help the FM meet his tight deficit targets.

Towards a Leaner Debt Profile

The government seems to be on track in its mission to reduce public debt as a percentage of GDP. It has set next year’s target at 44.2%, much lower that the 52.5% target of the 13th Finance Commission.