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India budget targets 10 percent growth; reduction in deficit

India budget targets 10 percent growth; reduction in deficit

India’s Finance Minister Pranab Mukerjee, presented his annual budget to Parliament last Friday; he revealed that India had weathered the global slowdown quite well; in fact manufacturing output rose 18.5 percent in November 2009, compared to the previous year, while the overall economy grew at almost 8 percent.  The minister predicted the fiscal deficit would fall to 5.5 percent in the 2010-11 fiscal year from 6.9 percent in the current year. He forecast the deficit would fall to 4.1 percent in 2012-13.

The Congress led government seeks to maintain high levels of public spending to support strategies aimed at the poor, boost a flagging rural economy and modernize the country’s infrastructure. The budget includes a record $43 billion for infrastructure development.

To offset the pain of higher prices, Mukherjee reduced the personal income tax for 60% of the nation’s taxpayers, giving them more spending money (by raising the minimum threshold for taxation). By April next year, a new direct tax code and the goods and services tax (GST) will be introduced.

The target for raising funds through the disinvestment of stakes in state-owned companies has been set at an ambitious $5.4 billion which is 25 times the target for the previous year. This implies that the government may be ready to take on some unpopular decisions in battling employee unions and other vested interest that oppose privatization.

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