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India Budget Aims to Promote Investment, Aid Poor - 2004-07-08

India's new left-leaning government is promising to maintain high economic growth, even as it pledges more funds to benefit the country's poor. As Anjana Pasricha reports from New Delhi, the government also raised defense spending substantially in its annual budget.

Finance Minister Palaniappan Chidambaram says the new government expects the economy to stay on a path of high growth of about seven to eight percent a year.

"Growth will be sustained by increased production and value addition in agriculture, a marked improvement in industrial production, and continued buoyancy in the performance of the services sector," he said.

The coalition government, led by the Congress Party, says investment will be the key to growth, and promises to make India attractive to investors, both foreign and domestic.

Mr. Chidambaram says foreign investors will be allowed bigger stakes in telecommunication, aviation and insurance companies.

That may ease recent concerns that the new government would slow down economic reforms to please its leftist partners, who oppose measures such as selling state-owned businesses.

An economic analyst, T.N. Ninan, says the government has signaled its commitment to pursuing reforms.

"If there was a question mark about reform and whether this government is going to push the reform agenda, the answer is yes. He has managed to put disinvestment and privatization back on the agenda," he said.

At the same time, the finance minister also announced massive spending on a raft of programs to help India's rural poor. They include measures to boost agriculture, and improve education and health facilities for poor children.

The Congress Party vowed to improve the lot of the country's poor, a pledge that unexpectedly swept it to power in elections a few months ago.

Mr. Chidambaram increased military spending by nearly 18 percent to $17 billion over the next financial year. The increase will help fund purchases of weapons and equipment, such as jet trainers and submarines needed to modernize the armed forces.

The finance minister also vowed to bring down a fiscal deficit that is running at about 4.5 percent. The budget, however, failed to impress the stock markets, which have been wary of the new government's left-leaning policies. The main share index lost more than two percent after the budget was unveiled.