India to unveil federal budget for new fiscal year

INDIA: India's Congress party-led coalition government Tuesday will present its third federal budget since winning power in May 2004 amid pressure from allies to deliver on pledges to the poor.

The government, which banks on the outside support of several communist parties for its parliamentary majority, has pledged to improve the lives of the almost 300 million Indians who live on less than a dollar a day.

The business community is also expecting gains, with the country's main stock market index, the Sensex, up to a record high of 10,282.09 Monday ahead of the budget for the fiscal year starting April 1. On Monday the government maintained its better-than-expected economic growth forecast of 8.1 percent for the fiscal year ending March in the annual pre-budget economic survey.

The news buoyed the market and raised expectations that Finance Minister Palaniappan Chidambaram would call for greater foreign direct investment (FDI) in India's economy.

"There has to be more opening up of the economy through the FDI route. Overseas investors would like to see a focus on infrastructure, power and the retail sector," Andrew Holland, executive vice president of DSP-Merrill Lynch, told AFP.

"For higher growth rates, the government will have to focus on agricultural growth and opening up of retail and textile sectors," he added.

India's farm sector accounts for almost a quarter of the economy and employs the vast majority of its one-billion-plus population and the government this year launched a massive jobs program to help poor farm labourers.

However investors said any sudden changes in policy to spend more on the poor via new taxes would not be welcome.

"We would be happy to see the finance minister keep things at status-quo and signal the direction ahead," said Bidisha Ganguly, chief economist of BRICS Securities.

"A further rationalising (cut) in the corporate tax structure would be welcome," she said. Another analyst said he expected a tax on share market transactions, but no increase in income tax. New Delhi, Tuesday AFP