India Vows Purchasing Power Boost in Budget to Revive Growth
(Bloomberg) -- India’s finance minister pledged in her budget speech to lift the purchasing power of citizens to help arrest the slowdown in Asia’s third-largest economy.
“This is a budget to boost incomes and enhance purchasing power,” Nirmala Sitharaman said in Parliament in New Delhi Saturday.
She said the fiscal plan is based around three main themes: an “aspirational India, economic development for all and a caring society.”
Some highlights of her speech so far:
- Rural: Farm, rural sectors to be allocated 2.83 trillion rupees ($40 billion); agriculture credit target for next year set at 15 trillion rupees
- Infrastructure: Transport infrastructure to be allocated 1.7 trillion rupees; a sum of 3.6 trillion rupees earmarked for piped water projects; power, renewable energy sector to get 220 billion rupees
- Health: 690 billion rupees allocated to sector
- Education: 993 billion rupees allocated to sector; foreign investment will be allowed in education as well as overseas borrowing by institutions
- Investment: A program proposed to encourage the making of mobile phones, medical devices; proposal to allow private sector to build data center parks
The government is trying to boost growth from its weakest pace in more than a decade, while trying to keep fiscal risks under control. Economists expect the budget deficit in the year through March will probably widen to 3.8% of gross domestic product from a previously targeted 3.3%.
India’s benchmark stocks fell 0.2% as of 12:29 p.m. in Mumbai on Saturday, while the bonds and currency markets were shut.
The minister’s top adviser on Friday urged the government to relax the deficit goal for the current year, as reviving economic growth was the “urgent priority.” Economists in a Bloomberg survey also predict the deficit goal for the coming year starting in April will widen to 3.5% of GDP, which is higher than the 3% mandated by law.
The deficit will likely be funded by a record market borrowing of 7.8 trillion rupees, according to a separate Bloomberg News poll. The finance minister may once more turn to the Reserve Bank of India for higher dividends, and look to boost receipts from the sale of state assets.
Growth is likely to rebound to 6%-6.5% in the year starting April from an estimated 5% in the current year, according to the Economic Survey, a report card of the economy presented to lawmakers by Sitharaman Friday.
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