The key concerns for the 2008-09 year are: a) possible inflationary pressure from food and oil, b) a slowdown in the growth rate from the heights of the past two years, c) increased pressure on fiscal, and d) the continued availability to funds to complete the ongoing investment cycle at viable interest rates.

The ongoing rationalisation of indirect taxes, especially as they reduce, will be important to increase the domestic producers' ability to compete globally and absorb the impact of strengthening rupee. In the longer term, the concerns are urgent investments of public funds in education, agriculture and infrastructure.

Food prices globally have remained high and are expected to remain at these levels for the next year as well. We were saved by a good monsoon, which reduced the need to import food items. We remain vulnerable to the monsoon this year to avoid inflation from food articles. Oil prices remain high and we have not passed them on.

Given the continued gap between the international and street prices of these items, despite some softening, the pressure to pass some of the price rise will lead to inflationary pressures in the coming months. Both these are likely to be the key risks for inflation in 2008-09.

2007-08 was a landmark year for tax collections, having zoomed near 40 per cent, putting many corporate profits to shame! However, a repeat performance in 2008-09 appears very challenging, given the expected deceleration in corporate profits, a significant driver of tax buoyancy in 2007-08.

There are also likely pressures on the fiscal due to food procurement, increased fertiliser subsidy and some enhancements to the employment guarantee program which are likely to cause additional fiscal pressure. Market stabilisation bonds and oil bonds that are not included in the fiscal deficit calculations are now sufficiently large to warrant an inclusion and close attention to their correction and curb.

We are deep in the middle of an investment cycle almost across all sectors, be it infrastructure, manufacturing, real estate, rural and urban sectors. Therefore, interest rates and continued liquidity in the system are key to ensuring we avoid the problem we faced in 1995-96, when the sudden monetary tightening both made funds scarce and increased interest costs to projects that were under implementation.

Indian interest rates are considerably higher as compared to those in global markets and to countries that compete with India like China, Korea, Brazil and Russia. Global interest rates are likely to fall even more in response to the US Federal Reserve's rate cuts, widening the gap even more.

In an increasing globalising economy like India, it is an imperative that access to low-cost funding is allowed to ensure that the competitiveness of our economy does not suffer. Undoubtedly, such access might increase the inflow of foreign funds. To absorb this flow, we must increase the absorptive capacity of our economy by strengthening sector policies.

A vibrant debt market as a supplement to the banking sector as a source of funds to fund investments is a must for ensuring continuing investments into our economy.

Denying access to cheaper global funds, artificially sterilising the holding rupee value at an indeterminate cost to the nation and distorting market forces in a liberalised environment could endanger the fragile competitiveness and attractiveness we have built as a nation. These interventions are also not sustainable, especially if one believes in the long-term sustainability of our nation's growth story.

A much more effective option is to help the economy become more productive, so that global competitiveness increases, by aligning interests as mentioned above and by streamlining tax costs. This government has done a great job in this respect and it needs to consolidate the gains made in tax structure and collection mechanisms, by anchoring lower indirect taxes and reducing exemptions.

Laying the solid foundation for a sensible GST with a uniform rate, even though it will be for a future government to implement, will go a long way in the Indian business's ability to absorb strong exchange rates.

For a nation that dreams of being the knowledge capital of the world, we have not invested sufficiently in our education system. There are also no major initiatives to address the mammoth challenge that looms ahead. Nearly 350 million kids will require to be educated in the next 30 years, making it an average of over 10 million per year.

Educational institutions from primary level to higher education are lacking in quantity and quality. This will require major investments from the government, an endearing policy that will encourage private capital to flow into this critical sector and innovative schemes to invite proposals that will upgrade existing facilities.

There should also be a significant increase in the outlay for increasing the teaching faculty's capacity and capability, as there is a huge shortage of this critical resource in the country. Unless this is fixed, the future crop of 'educated' Indians will leave a lot to be desired.

For the next three decades, India will be the single largest source of incremental manpower in the world, far ahead of even China, given our young population of such vast quantity. The above outlays will be an imperative to meet this most challenging task and to position our country as the human capital of the world, if not the knowledge capital. Problems of agriculture and infrastructure are known, hence need no special mention, except to highlight the lagging investments in rural infrastructure.

Coalition partners in our government undoubtedly negotiate hard during the Budget-making exercise. Fresh investments need to be made available in the sectors identified above, which can only be generated by reallocating resources from inefficient programmes that yield insufficient results. Clearly, we need to stop subsidy schemes that benefit non-poor, by sharply targeting end beneficiaries.

All development schemes must be re-architected to change from 'in the name of the poor' to 'for the poor'. One hopes that they use these negotiations to win support for schemes that will foster sustained growth and employment opportunities, educate the masses, improve the quality of life for all citizens and make our nation truly competitive on the global firmament.

The author is the managing director & Regional Head of Standard & Poor's, South Asia. The views expressed in this article are personal.