Mr. K.S.R. Anjaneyulu, MD & CEO, Lakshmi Vilas Bank

Notwithstanding the fact that the financial tsunami has permeated the entire world, India has proved its innate abilities and inherent strength to withstand in terms of GDP growth rate of 7% projected for this year and 8% for FY 2011. It was also supported by solid foreign exchange reserves to the extent of Rs 280 billion dollars, with GDP size of 1.2 trillion dollars, with lot of demographic dividends, strong financial system and collaborative approach between fiscal authorities and monetary authorities and excellent savings rate of around 37%. The only thing causing concern is inflation and fiscal deficit and huge government debt covering around 80% of our GDP which were intended to protect the country from the world’s financial crisis by injecting adequate liquidity into the system to ensure that GDP growth doesn’t come to a startling halt. It’s true that the government and RBI have to strike a balance between sustained economic growth, inflation and stability of financial system, but they need to prioritise depending upon the circumstances. As far as the Banking industry is concerned, I wish that the benefit of section 80C of IT Act should be given for bank deposits for the tenor of 3 years instead of 5 years. To enable banks to finance liberally for infrastructure, the interest income earned on this financing should be exempted from IT. Govt should think of various measures to support the banking industry to propel them to finance infrastructure needs of the country in terms of providing adequate take out finance or refinance on the lines of Export refinance, Agri refinance, SIDBI refinance etc. This will provide liquidity support and help banks in terms of structural liquidity management process, since there is a huge requirement of 500 billion US dollars for the next 5 years for funding infrastructure. Finally the aspect of base rate should be postponed for implementation till the FY 2011 in view of the practical difficulties involved. In the ensuing Budget, certainly the govt is expected to take some measures to control inflation and to contain fiscal deficit by exploring all the possibilities to increase revenues by widening the base, by reducing the tax rates and by incentivising the tax payers. It will also attempt to plug all the loopholes in the public distribution system and try to identify the really downtrodden who are eligible for government support either for food subsidy, oil subsidy or fertiliser subsidy. Finance minister will try to bring the aspect of oil subsidy as part of budget instead of showing it as an off-budget item. Government is expected to encourage agriculture production and its contribution to the GDP of the country. As originally envisaged under the FRMB Act, the revenue deficit of the country should have been nullified by the end of FY 2009 and fiscal deficit should have been contained at 2% of GDP by end of FY09. Since we could not abide by that promise due to the reasons beyond the control of the government, a specific roadmap may be given this time in the budget.

K.S.R. Anjaneyulu