India promises economy to ‘take off’ with new budget

India’s finance minister has announced the government’s new budget, promising a slew of measures that attempt to balance welfare spending with high economic growth and infrastructure development.

Arun Jaitley, India’s finance minister, announced the much anticipated budget on Saturday, the since Prime Minister Narendra Modi won a thumping majority in national elections in May on the back of promises that he would turn around the economy and boost job creation. 

“The credibility of India’s economy has been re-established,” Jaitley told Parliament in a 90-minute speech.

“India is about to take off on a faster growth trajectory once again.”

Jaitley said the Indian economy is slated to grow at 7.4 percent in the current fiscal year, which ends in March, and will continue grow at between 8.1 and 8.5 percent in the next year.

There were few sweeping reforms that the government has been promising, but economists and business leaders reacted to Saturday’s announcement with cautious optimism, a far cry from Jaitley’s first interim budget in July, which was widely panned. 

“It’s a very positive budget. No big bang, but a steady move forward,” Ajay Shriram, president of the Confederation of Indian Industries, told CNN-IBN. “It’s moving in the right direction.” 

New growth estimates announced in late January make India the world’s fastest-growing economy, surpassing neighbor and rival China. But the higher growth projections follow a revision of the baseline against which India calculated economic growth. 

India’s annual growth averaged about 8 percent in the decade up to 2010, but slumped to about 5 percent in the following years. 

Jaitley said his government would stick to the country’s “challenging” fiscal deficit target – the gap between what the federal government earns and spends – of 4.1 percent of gross domestic product in the current year. 

But he said the government’s target of bringing that number down to 3 percent would take three years because of the need to increase government spending to boost infrastructure growth in Asia’s third-largest economy. 

Despite having widely panned the previous government’s welfare programs, the finance minister announced no cuts to India’s food, fuel or fertilizer subsidies. 

Perhaps with an eye on upcoming local elections, including in the largely poor and rural state of Bihar, Jaitley said that “all our schemes should center around the poor”.

“We need to cut subsidy leakages, not subsidies themselves,” he said, adding that the subsidies needed to be targeted better.