MUMBAI, INDIA — India’s budget for 2015 is being called its most significant and comprehensive in more than 20 years. It includes several reforms aimed at boosting growth and investment and making India a more friendly country for business. It also has several measures that could prove to be major turning points in India’s fight against extreme poverty.
The budget puts a lot of emphasis on tax reform. It lowers the corporate tax rate by 25 percent. It also simplifies India’s tax code and removes red tape barriers. Business leaders are optimistic about these reforms and expect them to boost growth and investment. The budget also raises taxes on the rich by two percent and includes plans to crack down on tax evasion, long a serious problem in India.
It also increases spending on infrastructure by $11 billion. This is good news for a country whose infrastructure is severely underdeveloped in many regions. Since India imports most of its oil, the fall in oil prices has led to an automatic reduction in spending. The government has taken advantage of this to increase spending in many key areas without adding to the budget deficit, which is expected to contract from 4.5 percent of GDP to 4.1 percent.
The budget includes major increases in social spending and this is perhaps its most significant component. It proposes a comprehensive social safety net for hundreds of millions of India’s poor for the first time. The details still need to be hammered out, but the plan proposes public insurance schemes and pension programs that target the poor and working class. They would be similar to the welfare programs that exist in most Western countries but would apply to a much larger population. This is a big step forward in India’s fight against extreme poverty.
Environmentalists are the least happy with the new budget, which includes major cuts in environmental spending. The budget cuts funding for the Ministry of Environment, Forests and Climate Change by 25 percent. It also cuts funding for the Ministry of New and Renewable Energy by two-thirds and cuts funding for the National Mission of Sustainable Agriculture by 80 percent. Environmentalists worry this will severely hamper India’s ability to fight pollution and tackle climate change.
While the budget may be weak on the environment, it has still generated a lot of optimism within India. The economy is expected to grow by eight percent this year. Economists say the tax reforms will make India an easier place to do business. But the social safety net is the budget’s most significant and historic proposed change. If the plan goes through, it could make this the most significant budget in the country’s history and will be a big step forward in the fight to end poverty.
– Matt Lesso