India’s millions were looking forward to the budget, which failed to cheer them up on Friday. Agence France-Presse
Prime Minister Narendra Modi on Friday hailed a “new chapter for India” as his re-elected government unveiled what he called a “green” budget aimed at reviving growth and creating a $5-trillion economy.
In the first budget since Modi won a second term by a landslide in May, Finance Minister Nirmala Sitharaman said she wanted to boost Foreign Direct Investment (FDI) and infrastructure spending.
The government set a target for the economy to grow to $5 trillion by 2025 from the present $2.7 trillion.
Sitharaman said it would reach $3 trillion by March next year.
The main opposition Congress on Friday targeted Sitharaman’s first budget and called it “utterly lacklustre, nondescript, uninspiring & directionless.”
“Zero on Economic Revival, Zero on Rural Growth, Zero on Job Creation, Zero on Urban Rejuvenation,” tweeted Randeep Surjewala.
Rahul Gandhi said the budget was likely to only help the rich and not the poor.
“The government will examine suggestions of further opening up FDI in aviation, media, and, insurance sectors in consultation with stakeholders,” said Sitharaman.
Also, insurance intermediaries could receive 100 per cent foreign direct investment.
She also said that local sourcing norms of 30 per cent would be eased for FDI in the single-brand retail sector, a demand put forward by several multinational companies.
Sitharaman said FDI in India has remained robust despite global headwinds.
The government will invest 1 trillion rupees ($15 billion) in infrastructure over the next five years, Sitharaman said.
The government will raise 1.05 trillion rupees ($15.5 billion) through disinvestment in government-owned companies in 2019-2020, she added.
The minister also ditched the traditional British-style budget briefcase in favour of a cloth ledger, in what chief economic advisor Krishnamurthy Subramanian said symbolised India’s “departure from the slavery of Western thought.”
Sitharaman, 59, also said India’s public sector banks would be injected with $10.2 billion to tackle bad loans.
Sitharaman told Parliament that India’s economy is now the sixth largest in the world.
In terms of purchasing power parity, it is the third largest after the United States and China, she said.
The finance minister also announced cash handouts for small farmers, a pension scheme for informal workers and a doubling of tax relief for the lower middle class.
Small farmers would be paid 6,000 rupees ($85) annually, benefiting as many as 120 million households.
About 30 million retail traders and small shopkeepers with annual incomes of less than 15 million rupees ($220,000) would get pension benefits, she said.
The budget doubled income tax exemptions for those earning up to 500,000 rupees ($7,140) a year from the existing 250,000 rupees ($3,570).
The decision would benefit 30 million lower-earning taxpayers.
Sitharaman said that nearly 20 million new houses would be constructed by 2022 and that all rural household would have drinking water by 2024.
The minister also announced that the central government deficit to 3.3 per cent of gross domestic product in fiscal 2019 from 3.4 per cent in fiscal 2018.
This would be achieved by divestments, including of Air India, increased excise duties on petrol, diesel, precious metals and tobacco, and higher taxes for those earning between 20 million and 50 million rupees ($290,000-730,000).
Moody’s said in a research note however that achieving a lower fiscal deficit while maintaining support for growth and incomes would be “very challenging.”
The government also earmarked 100 billion rupees ($1.5 billion) for creating the infrastructure to promote electric cars in the country.
This includes tax breaks for individuals on the purchase of electric cars.
The government aims to invest in infrastructure and other incentives for electric vehicles to reduce carbon emissions and air pollution.