Union Budget creates buzz among global investors

Washington: India's Union Budget presented by Finance Minister Nirmala Sitharaman has generated a buzz among international investors, especially among American companies, according to the head of an India-centric American business advocacy group. Finance Minister Sitharaman on February 1 proposed a sharp increase in expenditure on infrastructure, doubling of healthcare spending and raising the cap on foreign investment in insurance in her Budget for the next fiscal in a bid to pull India's pandemic-hit economy out the woods.

"Overall, I thought it was a great budget. Markets have reacted," Mukesh Aghi, president of US-India Strategic and Partnership Forum (USISPF), told in an interview. "I think they (US companies) are excited. They feel that for the first time in many, many years you have a budget which provides less government fine-tuning… It is a clearly defined budget which attracts a lot of International Investment," Aghi said,.

Same is the case in investment in the infrastructure sector, which has generated a large interest among the US companies, Aghi said. The government has proposed a budget outlay of Rs 2,23,846 crore for health and wellbeing in 2021-2022, an increase of 137 per cent from the previous year, with Rs 35,000 crore earmarked for Covid-19 vaccine in the upcoming fiscal. The US companies have been buying assets in India, now they can be more aggressive, he said. "So overall there are tremendous opportunities for the US companies to participate both on a short-term and long-term investment perspective," Aghi added.

Aghi said the farsighted budget will put India on a trajectory of double-digit growth in the next few years. Responding to a question, he said that earlier budgets of the Modi government were fiscally very conservative in the sense that they did not want the deficit to go beyond three per cent. "So right there the government was trying to handicap itself by not being able to expand the pie. If you are going to revive the economy which contracted 20-30 per cent, you need to spend and create demand. You need to bring in capital to create supply," Aghi said.

As such, there is a massive shift in approach of the Modi government from the previous budgets to the latest one, which is much more focused on reviving the demand and attracting investment to create the supply. "Also, I would say this is less of a micromanagement," Aghi said, adding that this fits into Prime Minister Narendra Modi's slogan of basically minimum government and maximum governance. The budget reflects the "dramatic shift in the philosophy" of the Modi government when one compares this with the previous annual budgets, he said, adding that policy changes in sectors like insurance would attract large institutional investors. Noting that increasing the fiscal deficit lets the government borrow $164 billion, he said the focus on spending a lot on infrastructure will create jobs, create demand. "That is what Indian economy needs," he said.