Investors tell India to slash deficit

The Indian government should introduce a unified tax system, end the fiscal stimulus and address the country's deficit if its annual budget is to impress investors, according to Nitin Jain, principal long-only manager at Kotak Mahindra UK.

"The stimulus package introduced by the government in response to the global financial crisis has boosted domestic demand by keeping more money in the hands of consumers. But the economy is now performing much better and we expect to see most of the stimulus withdrawn in this budget," Mr. Jain said.

"Many investors have become concerned about India's fiscal deficit. While better than expected economic growth will help reduce the deficit anyway, we expect the government to announce measures which will tackle it directly. One likely measure is the reduction in fuel subsidies."

Mr. Jain said India could also improve its fiscal health by introducing a widely anticipated national goods and services tax, which is currently levied as a sales tax at a state level.

But although investors hoped the government would rein in the stimulus, Mr. Jain said, infrastructure, agriculture and energy still stood to benefit from fresh state initiatives.