India focuses on rural spending in Budget
Analysts believe Budget will help foster economic growth
NEW DELHI Eying an election next year, India's government announced massive spending for rural areas in its annual Budget yesterday.
Delivering the last full annual Budget before an election due by May next year, Finance Minister Arun Jaitley allocated 14.34 trillion rupees (S$294 billion) for rural infrastructure spending and extra support for farmers.
He also announced plans to introduce "the world's largest government funded health care programme", saying it would cover some 500 million of the country's poorest people. He laid out plans to merge three public sector insurance companies and list the new entity.
Spending in fiscal 2018/19 was projected to increase by 13.2 per cent from the current year ending next month, with about three-fifths allocated to better infrastructure in the countryside, where two-thirds of India's 1.3 billion people live.
"This Budget is farmer-friendly, common citizen-friendly, business environment-friendly and development-friendly. It will add to ease of living," Prime Minister Narendra Modi said after the announcement.
Mr Jaitley said the spending in rural areas aimed at creating jobs , in addition to laying hundreds of thousands of miles of rural roads and more.
He later told state-run Doordarshan Television that the largesse had nothing to do with winning votes for Mr Modi's Bharatiya Janata Party (BJP).
Analysts thought otherwise.
"It looks like that the BJP is aiming to shore up support among rural voters," said Mr Shilan Shah, economist at Capital Economics in Singapore.
"It was no surprise to us that they relaxed the deficit targets."
Economists were in agreement that the Budget should help foster economic growth. A survey released this week laid out the government's expectations that India would soon become the world's fastest growing major economy.
India's needs its economy to grow more than 8 per cent a year to create jobs for the thousands of young people entering the labour market each year.
Mr Jaitley predicted growth would be above 8 per cent soon, but for 2018/19, the economy was expected to expand by 7.2 per cent, improving from 6.7 percent for the fiscal year ending in March, the weakest performance in three years.
This year's growth was slowed by the botched rollout of a nationwide goods and service tax in 2017, and a shock move to ban high value currency notes in late 2016.
"All-in-all, it was a business-as-usual budget for India and a great one for Bharat (rural India)," said Mr Amar Ambani, partner and head of research at IIFL in Mumbai.
"The government did what it thought necessary to boost revenue, revive growth and get election-ready." - REUTERS