Budget 2014: American Corporate Houses Ready to Pump Money into India

"Lower income tax rates with very harsh penalties for tax evaders. Encourage direct foreign investments in all sectors of the economy," he said.

Tough reforms are needed to overcome the challenges facing the Indian economy and to revive the critical Indian manufacturing sector, said Russell Green, the Will Clayton Fellow in International Economics at Rice University's Baker Institute for Public Policy and an adjunct assistant professor of economics at Rice.

Green said the new government must target four interrelated reforms to remove uncertainty: improve the business climate, improve infrastructure, reduce onerous labor regulations and carry out substantial institutional reforms in the government.

"Identifying important reforms is a relatively easy job in India. The challenge is in implementation," Green said.

Precisely because the world economy is still struggling to recover with dangerous bubbles appearing everywhere that are bound to pop, which is keeping money on the sidelines, India's new budget must be bold and robust and send a clarion signal of dynamic, second-phase reforms, he said.

"Top of the list would be to lift investment caps in insurance and defense in the next Parliamentary session. Clarity on tax policy, adopting all or most of Dr Shome's recommendations, bringing certainty to the fact that taxes will be prospective and not retroactive, will be welcome news," Somers said.

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