MUMBAI, India—India’s new government introduced a reform-minded budget July 10, vowing economic growth rates of seven per cent by promoting manufacturing and infrastructure and overhauling populist subsidies.
The budget for the fiscal year ending March 2015 is being closely watched as an indicator of whether Prime Minister Narendra Modi’s government will act quickly to will deliver on promises to revive stalled economic growth.
Finance Minister Arun Jaitley outlined the broad strokes of the plan, which he said would be a departure from the “mere populism and wasteful expenditure” that has dragged down Asia’s third-largest economy.
He said he would keep the government’s budget deficit at 4.1 per cent of gross domestic product this fiscal year. He indicated that would involve overhauling expensive subsidies for food, fuel and fertilizer that cost India’s government some $40 billion a year. He gave no details other than saying the subsidies would be “more targeted.”
Jaitley said the government could not rely only on spending cuts to reduce the budget deficit and should also work to spur economic growth back to 7-8 per cent, which would result in higher tax revenue.
He said that a revival of manufacturing and building of new infrastructure are ways to provide jobs. He announced programs to promote investment in factories, roads and ports.
Jaitley also announced that limits on foreign investment in the defence and insurance industries would be raised to 49 per cent from 26 per cent.