NEW DELHI — A new government has developed the first budget in India, one that aims to increase economic growth rates, fund infrastructure projects and bring the country out of crisis. Finance Minister Arun Jaitley said there will be “no stone left unturned in creating a vibrant and strong India” when the budget was presented at the Indian parliament in New Delhi.
Jaitley, who was responsible for outlining the $301 billion budget, vows to lift economic growth rates from 7 percent to 8 percent within three years and limit the budget deficit to 4.1 percent of gross domestic product.
India’s 1.2 billion people are “exasperated” by the country’s economic growth, which has slowed down to 5 percent in the past two years following a decade of expansion by an average of 8 percent. According to the government, this is the minimum amount necessary to provide jobs for the 750 million Indians in the workforce, which is anticipated to increase by 230 million by 2030. With high inflation, low manufacturing growth and the expectation of a sub-normal monsoon, India is in need of the same “shock therapy” that was administered in response to the economic crisis in 1991.
This “shock therapy” was promised by Prime Minister Narendra Modi and his Bharatiya Janata Party government who won a landslide victory in the recent election. The reform-minded budget for the 2014-2015 fiscal year will indicate whether Modi will deliver his promise to create jobs, harness soaring inflation and revive Asia’s third-largest economy.
In an attempt to address India’s “greatest long term challenge” of job creation, $1.13 billion is designated for infrastructure projects including investments in railways, airports and roads. This money is also allocated for building “smart cities” as part of India’s urbanization and modernization initiative. In addition, Jaitley announced plans to launch Skill India, a program that provides youth with employability and entrepreneur skills.
Another concern addressed in the budget is the fiscal deficit. The gap between what the government earns and spends has contributed to its lack of international investors and its rank as one of the “Fragile Five” economies at risk of potential crisis. In order to cut the deficit, Jaitley intends to target the food, energy and fertilizer subsidies on which the government has spent $40 billion.
Modi’s government will also be more open to foreign capital to help the economy. Jaitley revealed plans to open up the insurance and defense sectors to allow 49 percent ownership, up from 26 percent. India’s need for investment in infrastructure and its growing middle class make it one of the most attractive markets among emerging economic powers. Despite a rising interest from western investors, strict restrictions on investment and widespread corruption make it a difficult environment for foreign businesses.
Jaitley also announced proposals to address social measures, particularly the rise in violence against women in India. With a recent wave of sexual violence, the number of crimes against Indian women have increased by 26.7 percent in 2013 from a year earlier. The government plans to spend $9 million to improve women’s security on public transport and an additional $28 million in large cities.
Finally, Modi claimed that his government is committed to extending every possible help to the poor, the neo-middle class and the middle class. This includes his promise to install a toilet in every Indian home by 2019. Modi said that the budget “is a new ray of hope for the poor and downtrodden sections of society,” adding that it “has come as a sunrise for the last man in the line.”
While India’s new budget conveys many objectives of growth and improvement, implementation and effectiveness will ultimately allow for a successful economic recovery.
– Abby Bauer