India's government has unveiled its annual budget, which aims to lower the fiscal deficit and promote higher, more inclusive growth.
Presented on Friday by Pranab Mukherjee, the Indian finance minister, the federal budget projects the deficit for the next financial year beginning April 1 will be 5.5 per cent of gross domestic product (GDP).
The deficit during the current financial year was 6.9 per cent of GDP, the highest level since 1994.
Following its road map towards reining in the deficit, the government is to narrow the gap to 4.8 per cent for the fiscal year after next, ending March 31, 2012 the minister said.
Mukherjee also pledged to return India to its high economic growth rate of 9 per cent, make growth more "inclusive" while developing infrastructure and strengthening food security.
"We hope to breach the 10-per-cent growth mark in the not-too-distant future," he added.
Broad based growth
Mukherjee said the government was to review the stimulus measures introduced during the downturn to make the growth more broad-based.
|Opposition say that Mukherjee's plans would push up the already high food prices [EPA]
The global economic recession slowed India's 9-per-cent growth rate to 6.7 per cent in 2008 but the economy staged a recovery to post 7.2-per-cent growth in 2009.
"Today, as I stand before you, I can say with some confidence that we have weathered the crisis well," he said.
An expansion of 8.9 per cent in manufacturing has helped compensate for the shrinking agriculture output in a year of low rainfall.
Mukherjee's budget maintained the focus on infrastructure and social spending, while raising investment in rural and urban development as well as education and health care.
Defence expenditure was hiked 3.98 per cent to 1.47 trillion rupees (32 billion dollars) in view of the prevailing security situation and terrorist threats.
Approximately 7 billion dollars were raised by the government by selling stakes in state-owned companies and more will accrue to the exchequer from further divestment and the auctioning of bandwidth rights for 3G mobile phone networks.
To increase government income, Mukherjee announced a slew of tax measures including a plan to introduce a countrywide goods and services tax, aimed at reforming the country's revenue collection system by next year.
But in an unprecedented move, the entire opposition walked out of the parliament to protest the taxation proposals which would result in a petroleum price hike.
Sushma Swaraj, leader of the main opposition Bharatiya Janata Party condemned the move as "anti-poor, anti-people," saying it would further push up the already high food prices.
Indian Premier Manmohan Singh, however, lauded the budget.
"The finance minister has done a right mix of estimating the growth requirements and at the same time building in it a certain amount of moderation on the price front," Singh said.
The industrial sector also praised the proposals as "pragmatic and positive" while the benchmark Sensex surged soon after the budget.
The 30-share index that rose by 2.1 per cent during intra-day trade closed at 16,429.55, up 1 per cent.
The broader, 50-share Nifty index of the National Stock Exchange also registered a 1.29-per-cent rise to close at 4,922.30.
"The budget is a big positive in terms of controlling the fiscal deficit - from 5.5 per cent to 4.8 per cent and later to 4.1 per cent," banker Uday Kotak told the PTI news agency.
"It was a budget wherein the finance minister displayed that a successful tightrope walk is possible despite fiscal injuries," said Dinesh Thakkar, chairman of Angel Broking.
"The finance minister clearly managed to make every section of the economy happy, be it corporates, individual taxpayers, economists, analysts and others."