India’s new government has unveiled what it says is a roadmap to revive economic growth, which has fallen to its lowest level in nearly two decades. The right-wing Bharatiya Janata-led government, expected to be more business friendly, is promising greater opportunities to foreign investors.
Finance Minister Arun Jaitley says the government will leave no stone unturned to spur growth in a country which he says is “exasperated” after growth has plummeted to less than five percent for two straight years.
He was presenting the annual budget six weeks after the Bharatiya Janata Party came to power on promises of creating new opportunities for the one million people who enter the workforce every year.
“The steps I will announce in the budget are only the beginning of a journey towards a sustained growth of seven to eight per cent growth within the next three or four years, with the macro economic stabilization which includes lower levels of inflation, less fiscal deficit and a manageable current account deficit,” said Jaitley.
The government’s first budget was watched closely by domestic and foreign investors to see if Prime Minister Narendra Modi, who successfully wooed investors to Gujarat state which he earlier governed, could restore business confidence in the country.
The government did announce several economic reforms to signal its business friendly intentions.
It raised limits for investors in two critical sectors - defense and insurance - from 26 percent to 49 percent. India is the world’s largest arms buyer. The government promised a bigger role for the private sector as the country tries to modernize its dilapidated infrastructure. It also announced measures to revive the manufacturing sector.
The government says it will bring about a uniform goods and services tax making it easier to do business across the country’s 29 states.
Finance Minister Jaitley sought to reassure investors, who had been scared away when the former government raised tax claims of billions of dollars on several companies after changing tax laws retroactively.
“I would like to communicate to this august house and also to the investor community at large that we are committed to providing a stable and predictable taxation regime which would be investor friendly and spur growth,” stated Jaitley.
Promising to curb government spending, Jaitley said that he will contain the budget deficit to four point one percent. That is expected to be a tough task because of costly subsidy programs announced by the previous government. The government says it will make the subsidies more targeted even as it promised to protect the poor.
Controlling the high deficit is considered a key step for economic revival.
After winning the biggest mandate in 30 years, the government is under pressure to deliver on its promise of returning India's economy to a high growth path.