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India to Reduce Its Debt Burden, Review Stimulus

India plans to reduce its debt burden as the economy returns to a high growth path. In its annual budget presented Friday, the government has also outlined measures to improve flagging agricultural production.

Finance Minister Pranab Mukherjee says with the economy in a far better position than a year ago the government will roll back tax cuts and review stimulus measures introduced during the economic downturn.

"Now that recovery has taken root, there is need to review public spending, mobilize resources, and gear them towards building the productivity of the economy," he said.

Presenting the annual budget in parliament Friday, Mukherjee said the fiscal deficit, which rose to nearly seven per cent last year, will be slashed to five and a half per cent in 2010-11, and brought down even more subsequently.

India's economy is picking up momentum rapidly. According to government estimates, it grew by more than seven percent last year, and will expand by 8.5 percent in the next fiscal year.

The finance minister says he wants to make this economic recovery broad-based and inclusive, and has announced higher spending to boost a flagging rural economy and modernize both rural and urban infrastructure.

Mukherjee also says reviving the agriculture sector will be a priority for the government.

"The agriculture sector occupies center stage in our resolve to promote inclusive growth, enhance rural income and sustain food security," he said.

He says farmers in the underdeveloped eastern regions of the country will get assistance to raise crop productivity. The government will also emphasize better water and soil management techniques to boost production.

Reviving the agriculture sector has become vital both to protect the welfare of two-thirds of the population which lives off farming, and to control food prices, which have been galloping amid falling production.

However, the government's plan to raise taxes on gasoline and diesel fuel angered many opposition lawmakers because they could feed inflation.

India's economy - Asia's third largest - has recovered from the global financial crisis faster than expected, partly due to strong growth in the manufacturing sector. The government says the challenge is to return to the nine per cent growth, which was witnessed in the year before the global financial crisis shrunk economies worldwide.