Is the rail budget any indication to what lies ahead in the Union Budget today?

Nilesh Shah: The Rail Budget has been an extremely positive and a constructive budget. It is the beginning of a good exercise on the part of the Union Government. A lot of measures which were undertaken in the Rail Budget are extremely progressive and constructive. It takes both, medium to long term perspective and it is a good indicator of what probably lies in store for the Union Budget. It looks that the government is basically ready to bite the bullet and takes certain tough measures wherever required.

ET Now: What do you make of yesterday's policy action because markets for sure did not applaud the Eco Survey or the credit policy?

Nilesh Shah: Yes, if you look at the combination of both the RBI event as well as the Economic Survey both basically indicate that probably FY11-FY12 will be the worst year in terms of growth and both the documents project a 6.9% for growth for this fiscal. However, both the documents are extremely positive about the growth for the next one-two years where they expect growth to be north of 7% which is pretty good and barring any significant global events we seem to be set for that. The big challenge from both the documents perspective is that how does the government respond in terms of the Union Budget whether the government goes ahead and undertakes fiscal consolidation and initiates measures which would basically address supply side constraints. These are some of the important things to which both the RBI policy as well as Economic Survey have highlighted and one has to really see how the budget is going to address these issues.

ET Now: Do you think the budget will be a reformist one or a populist one this time?

Nilesh Shah: Well it would probably be a combination of both. I do not think that the government is in a situation where it would want to abandon populism. That is basically a phenomena which has got deeply embedded into our political system and therefore I do not think that populism is something which will be abandoned. Also, the general belief is that subsidies in general are not bad provided the subsidies are more directed and they reached the directed beneficiaries. So you would probably continue to see increased allocations to a lot of these social security initiatives but on the other hand it is quite possible that it could be reformist in terms of basically the way the subsidies are spend, the way subsidies are delivered in the manner in which a lot of supply side constraints are addressed.

The big area to really watch out for is that whether the budget lays the foundations for introduction of DTC, whether it moves a step towards implementing GST and it addresses a lot of the other constraints which are there in the economy particularly on the infrastructure side. It is going to be a combination of both increased allocations to social security sectors at the same time it would obviously make a pretty strong and a constructive attempt at reforms.