Getting the balance right

The government has been given a clear mandate, along with an unexpected but welcome consolidation in the polity. The question is, what���s the mandate, given the diverse set of voters in India?

I would believe it is a signal to step up efforts towards inclusive growth by one segment, and an uptick in investment spending towards education, agri and infrastructure by another ��� while maintaining a continuation at the Centre with fewer hindrances. An all too utopic outcome! So now it���s up to the new government! Immediate next steps are critical in the context of India, achieving a modest but sustainable 7.5% growth by 2011.

The forthcoming Budget should signal:

Fiscal consolidation, measured reduction in wasteful revenue expenditure, and a deadline-driven action plan towards GST and some select PSU divestments.

A one-to-three-year infrastructure spend with a concrete plan to implement and track.

Clear policy and outlay on primary education from the fisc, and private capital in post-secondary segments.

Vocational education is so obvious and much needed too.

A focus on the SME segment would be welcome as that���s where the pain of the recent downturn has been the most pronounced.

Opening up of sectors such as insurance which are capital-short to bridge India���s under-insurance as well as develop a long-term savings pool.

And finally, an ecosystem of efficient governance and public-private partnership which will attract quality FDI at a new level ��� definitely not behind Brazil!

On the markets front, if I had to pick one, it would be the development of the long-term local bond market as a priority, bringing savings into the real sector, thereby reducing the burden on banks and rates while the government still runs a largish fiscal.

This government is extremely well-poised to deliver a set of investment and supply side-led initiatives in the first phase. Markets are usually a good indicator but more often than not, get ahead of the real sector. Unfortunately, the latter has some distance to go.

(The author is KKR India CEO & Country Head)