Money > Budget > Budget News & Analysis FEBRUARY 7, 2002 I 13:45 IST rediff.com
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ADB seeks more fiscal reforms in Budget

The Asian Development Bank said on Wednesday that India should unveil steps to shore up foreign direct investment and cut burgeoning fiscal deficit in the Union Budget due later this month.

"There are two areas which need special focus--environment for foreign private investment and fiscal deficit. India has to do lots of work in these areas (in the Budget)," ADB president Tadao Chino told a news conference in Ahmedabad.

Finance minister Yashwant Sinha is scheduled to present the Union Budget for 2002-03 (April-March) on February 28.

Complex regulatory frameworks and tough labour laws have been the major irritants in India's efforts to attract large inflows of foreign private investment.

"Improving the environment for private sector investment is crucial," he said.

ADB chief said the bank also expected tough steps to rein in India's yawning fiscal deficit by improving revenues and cutting down wasteful expenditure like subsidies and tax exemptions.

"A holistic approach has to be taken towards handling the fiscal scenario. There is room for improving efficiency of public expenditure, particularly in the areas of subsidies and tax exemptions," he said.

The consolidated fiscal deficit of the federal government and the states have been close to nine percent of GDP for two years and looks set to exceed 10 per cent in the year ending March.

Revenues have been affected by the slowdown and economists say the high deficit limits the government's ability to pump-prime the economy.

Chino said Indian economy could log a growth rate of "about 5 per cent" in the calendar year 2002.

"ADB expects India to grow about 5 per cent this year," he said.

India said on Tuesday that it expected economy to grow at 5.4 per cent in 2001-02, better than last year's dismal 4.0 per cent. GDP expanded 6.1 per cent the year before.

Chino said the multilateral agency could increase its annual lending to India to at least $2 billion from the current level of $1.5 billion.

"We are very positive about India. The assistance can be raised to $2 billion," he said.

Indian officials and ADB representatives would begin talks on the funding budget for 2002 next week, he said.

Reuters

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