BUDGET - BMR Advisors

FOREWORDInfrastructure is the backbone of every economy. SustainableGDP growth can be achieved, only if the infrastructurebottlenecks can be eased out with as much conviction as ispossible. The Government certainly deserves kudos for havingrecorded growth rate of over 8 percent in 12 successive quartersupto December 31, 2007 and it is bullish in achieving 8.8 percentin the current year too. It believes that the drivers of the growthwould be manufacturing and services. These two segments ofthe economy also play a critical role in the growth of theInfrastructure sector. Therefore, if one were to follow theinstincts of the Government, it would seem that growth in thesetwo critical segments of the economy is likely to spur the growthin the infrastructure sector as well.Often times, successive Finance Ministers have used taxpolicies as a tool to provide impetus to sectors that it desires toaugment. Over the years, the current Finance Minster hasshown reluctance towards using tax sops as a means to augergrowth and therefore, it is not surprising that this year, we do notfind any earth shattering tax exemptions / policies, which can besaid to be accorded to this sector.From his budget speech, it is abundantly clear that he desires touse increased budgetary support via creation of funds as a toolto help the sector. Notable to mention in this context would beincreased allocation to National Highway DevelopmentProgram, Rural Electrification Programme, Accelerated PowerDevelopment and Reforms Project, etc.While the creation of a national fund for Transmission andDistribution reforms, is a welcome move and would provide aboost to this very critical segment, on whom hinges the burden ofevacuating ( with least quantum of losses) the energy beinggenerated / expected to be generated by additional generatingcapacities planed/implemented, a bit of the euphoria, wouldvanish, given that import duty has been increased for thissegment as well, as has been done for the generatingcompanies which are non mega in nature.The Budget proposals also reinforced the Governmentsintention to continue pushing for Ultra Mega Power Plants, whichis certainly a positive sign for the Indian economy looking at theresults of the 3 UMPPs already awarded. In addition, creation ofindiaBUDGET20083