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Budget 2013: Eye on short-term and long-term objectives

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(Any opinions expressed here are those of the author and not of Reuters)

India’s annual budget always attracts a lot of interest and this year’s edition will be especially important. Budget 2013 is not just significant because it’s the last to be tabled before parliamentary elections due next year but also in light of economic headwinds.

Areas that require immediate attention include the need to invigorate investment, pacify rating agencies, lower subsidies, address structural bottlenecks and jump-start domestic growth. This will require the administration to make tough choices. A turnaround in investment, in particular, is unlikely in the short term.

The budget should be dual-focused, with an eye on short- and long-term objectives. No one expects a rapid turnaround but the country’s biggest malaise — inaction — must be addressed and could form the crux of the fiscal statement come end-February.

Signs of sustained reforms and improvement in governance would buoy market sentiments, improve investor perception and percolate through the real economy.

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