India: Spending on Infrastructure to benefit rural India

Finance minister Palaniyappan Chidambaram's latest speech may have skirted the infrastructure sector in the announcement of big-bang budget proposals. But infrastructure players may not have much to complain.

The allocation for the development of national highways as well as rural roads has been increased, two ultra-mega power projects have been announced and asset management companies (AMCs) will now be able to dabble in infrastructure funds.

In another important development, there has been a whopping 31.5 per cent increase in the allocation (over the earlier Rs18,696 crore) towards the Bharat Nirman programme. A project of the department of drinking water supply under the ministry of rural development, this programme aims at strengthening infrastructure in six areas, — housing, roads, electrification, communication (telephone), drinking water and irrigation. All this in the four years from 2005-06 to 2008-09.

Roads
The provision for the National Highway Development Programme (NHDP) has been increased to Rs.10,667 crore from the existing Rs.9,945 crore. Of this, Rs.405 crore will be mopped up by the North-Eastern region of the country for which another road-cum-rail project has also been announced over the Brahmaputra river in Bogibil, Assam. Work on the Golden Quadrilateral road project - which dominated discussions during the last two annual Budget presentations - is on in full swing. According to the finance minister, the project will be completed by 2009.

Cement
The Budget has been a mixed bag for cement producers. The focus on the NHDP will benefit cement companies. But a differential excise for cement manufacturers will leave some of them sulking. The excise duty on cement has been reduced from Rs.400 per tonne to Rs.350 per tonne for cement bags sold at Rs.190 per bag or less in the retail market. But those sold above this price will attract an excise duty of Rs.600 per tonne.

Power
Two more ultra-mega power projects (UMPPs) will be approved by July 2007. Each of the coal-based project will have a capacity of 4,000 MW or above. The recently-released Economic Survey 2007-08 had reported that the CEA (Central Electricity Authority) has identified nine sites in nine states for the UMPPs. These include four pithead sites and five coastal sites.

Irrigation
An additional 24 lakh hectares of irrigated area are proposed to be created by the end of financial year 2007-08, including nine lakh hectares under the Accelerated Irrigation Benefit Programme. During this period, the target for farm credit has been hiked from Rs175,000 crore to Rs225,000 crore. An outlay for irrigation has also been announced at Rs11,000 crore.

The duty on lift irrigation, agricultural sprinklers and food processing equipment reduced from 7.5 per cent to five per cent. The finance minister has also announced a one hundred per cent subsidy for small farmers and 50 per cent for other farmers for water recharging schemes.

Tourism infrastructure
The allocation towards tourism infrastructure has been hiked from Rs.423 crore to Rs.520 crore.

OECD predicts steady growth for BRICs

According to a new study by Organisation of Economic Cooperation and Development (OECD), economic growth in the emerging BRIC economies (Brazil, Russia, India and China) will continue on a steady path even as the developed nations will see a slower progress.

The OECD study said, "The latest composite leading indicators (CLIs) suggest that moderate economic expansion will continue in the developed countries and Brazil, Russia, China, and India will continue with their steady expansion."

The OECD has compiled composite leading indicators (CLIs), which summarise information contained in a number of key short-term indicators linked to GDP for its member-countries since the 1980s.

It was designed to provide early signals of turning points (peaks and troughs) between expansions and slow-downs. The CLI for the OECD area, which covers 29 developed countries of Europe, America and Asia Pacific, rose 0.5 point in May to 110.1 from a revised 109.6 in April.

For China, the CLI rose 3.3 points in May whereas CLI for India increased 1.6 points in April as data for May was not available in the the report. India's CLI rose to 154.8 points in April from 153.2 points in February this year.

The CLI for Russia rose by 1.4 points and for Brazil it increased by 2.4 points.

Meanwhile, for the United States CLI increased by 0.5 point in May and in the euro areas CLI increased by 0.1 point in May and in the UK the index went up by just 0.5 point in the month.

OECD's CLI index is a tool to provide qualitative information on short term economic send this article to a friend movements rather than quantitative measures emphasising on movements over time in up or down directions rather than levels.