It’s a budget meant to keep millions of train passengers happy. What’s not clear though, is the agenda for reform. Railway minister Mamata Banerjee unveiled her annual budget on Friday. And her priorities could indicate what’s in store on Monday, when the union budget is announced. For starters, Banerjee did not hike fares for either passengers or freight. She also announced several new trains linking major towns and cities; and also1,000 km of new railway lines.
The annual plan for the railways in 2011-12 is the highest ever. A grand total of Rs57,360 crore have been earmarked. Rs20,000 crore out of that will come from gross budgetary support. And market borrowings will account for another Rs20,594 crore. The rest of the cash will come from internal resources and a diesel cess.
Also in Parliament on Friday, the finance ministry released its annual economic survey. Not surprisingly, the report singled out inflation as the dominant concern, but remained optimistic about growth. The survey expects India’s economy will expand by 9% in 2011-12. But it warns that there are signs food and fuel inflation are spilling over into general inflation. The survey concludes that the combination of high growth and high inflation warrants a tight monetary stance.
One promising aspect of the survey was the outlook on India’s fiscal deficit. According to the survey, it’s on track with the 13th Finance Commission’s recommendations. But it adds that the government will have to manage expenditures better. The 13th Finance Commission had recommended India’s fiscal deficit be reduced to 3.5% of GDP by 2015 from the current 4.8%.
In corporate, BP and RIL have struck a deal that could change the face of India’s energy business. BP will buy a 30 percent stake in 23 of RIL’s oil and gas blocks. These include the lucrative KG D6 block in the Bay of Bengal. BP’s purchase will set it back by $7.2 billion. And it could pay RIL another $1.8 billion based on future performance. RIL says combined investments and payments could go up to $20 billion. The two companies will also create a 50:50 joint venture for sourcing and marketing gas. The deal is expected to help BP expand its Indian presence and RIL get advanced technology. And if the government gives it the go-ahead, it will be the single largest FDI India has ever seen.