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| India’s New Budget Aims to Spur Economy, Hit Hard by Cash Shortage | India’s New Budget Aims to Spur Economy, Hit Hard by Cash Shortage |
| (about 4 hours later) | |
| NEW DELHI — Trying to spur an Indian economy hard hit by its cash shortage, the government of Prime Minister Narendra Modi unveiled plans on Wednesday for next year’s budget that would significantly increase spending on infrastructure, rural areas and antipoverty programs. | NEW DELHI — Trying to spur an Indian economy hard hit by its cash shortage, the government of Prime Minister Narendra Modi unveiled plans on Wednesday for next year’s budget that would significantly increase spending on infrastructure, rural areas and antipoverty programs. |
| The budget plan was presented by the minister of finance, Arun Jaitley, in a highly anticipated annual ritual. It included tax cuts for lower income taxpayers and small businesses, even as it came close to sticking with the country’s target for reducing its budget deficit. | The budget plan was presented by the minister of finance, Arun Jaitley, in a highly anticipated annual ritual. It included tax cuts for lower income taxpayers and small businesses, even as it came close to sticking with the country’s target for reducing its budget deficit. |
| “With this gradual approach, I’ve ensured adherence to fiscal consolidation without compromising investment,” Mr. Jaitley said in a two-hour speech before the Indian Parliament. | “With this gradual approach, I’ve ensured adherence to fiscal consolidation without compromising investment,” Mr. Jaitley said in a two-hour speech before the Indian Parliament. |
| The budget presentation came as five states in India prepare to go to the polls beginning Feb. 4th, including India’s largest state of Uttar Pradesh. The prime minister is hoping to win that state to gain control over the upper house of Parliament, demonstrating strength in advance of national elections in 2019. | The budget presentation came as five states in India prepare to go to the polls beginning Feb. 4th, including India’s largest state of Uttar Pradesh. The prime minister is hoping to win that state to gain control over the upper house of Parliament, demonstrating strength in advance of national elections in 2019. |
| His budget plan received mostly positive responses for taking measures to increase consumer demand and jobs while still adhering largely to the deficit plan. It calls for reducing the deficit to 3.2 percent of G.D.P. for next year from 3.5 percent in the current fiscal year, a bit short of the government’s previously stated target of 3 percent. | His budget plan received mostly positive responses for taking measures to increase consumer demand and jobs while still adhering largely to the deficit plan. It calls for reducing the deficit to 3.2 percent of G.D.P. for next year from 3.5 percent in the current fiscal year, a bit short of the government’s previously stated target of 3 percent. |
| “The economy needs the spending to give consumption a boost, but the government is also giving weight to fiscal prudence,” said Dharmakirti Joshi, chief economist at Crisil Ltd., an Indian credit rating agency. | “The economy needs the spending to give consumption a boost, but the government is also giving weight to fiscal prudence,” said Dharmakirti Joshi, chief economist at Crisil Ltd., an Indian credit rating agency. |
| Mr. Jaitley said his budget had increased capital investment by about 25 percent and raised rural and farm spending by 24 percent. | Mr. Jaitley said his budget had increased capital investment by about 25 percent and raised rural and farm spending by 24 percent. |
| The budget also cuts income taxes to 5 percent from 10 percent for people making between $3,700 and $7,400 annually. But he imposed a 10 percent surcharge on higher-income taxpayers. | The budget also cuts income taxes to 5 percent from 10 percent for people making between $3,700 and $7,400 annually. But he imposed a 10 percent surcharge on higher-income taxpayers. |
| Small businesses with annual revenue of up to $7.5 million — 96 percent of Indian businesses — would see their tax rates cut to 25 percent from 30 percent, Mr. Jaitley said. | Small businesses with annual revenue of up to $7.5 million — 96 percent of Indian businesses — would see their tax rates cut to 25 percent from 30 percent, Mr. Jaitley said. |
| Much of the spending in rural areas will go to building roads, with the aim of increasing efficiency and access to markets while providing jobs, Mr. Joshi said. The budget also substantially increased India’s expenditure on its rural employment program, to $710 million, the highest ever. | Much of the spending in rural areas will go to building roads, with the aim of increasing efficiency and access to markets while providing jobs, Mr. Joshi said. The budget also substantially increased India’s expenditure on its rural employment program, to $710 million, the highest ever. |
| The budget also included plans for campaign finance reform. Mr. Modi is expected to propose additional changes to bolster his attack on “black money,” or currency on which taxes had not been paid, which began when he announced a ban on the country’s largest currency notes in November. | The budget also included plans for campaign finance reform. Mr. Modi is expected to propose additional changes to bolster his attack on “black money,” or currency on which taxes had not been paid, which began when he announced a ban on the country’s largest currency notes in November. |
| Campaign finance is viewed as one of the main drivers of corruption, with a recent study showing that nearly 70 percent of contributions to political parties come from undisclosed sources. | Campaign finance is viewed as one of the main drivers of corruption, with a recent study showing that nearly 70 percent of contributions to political parties come from undisclosed sources. |
| Current laws do not require parties to report the sources of contributions of less than 20,000 rupees, or about $300. Mr. Jaitley’s plan would reduce that to 2,000 rupees, or about $30. | Current laws do not require parties to report the sources of contributions of less than 20,000 rupees, or about $300. Mr. Jaitley’s plan would reduce that to 2,000 rupees, or about $30. |
| However, one activist, Jagdeep Chhokar, a founding member of the Association for Democratic Reforms, a nonprofit organization, dismissed the change as ineffectual, saying donors would simply slice contributions into $30 pieces. To achieve transparency, he said, the government will have to proscribe cash contributions entirely, instead requiring they be made digitally so they can be traced. | However, one activist, Jagdeep Chhokar, a founding member of the Association for Democratic Reforms, a nonprofit organization, dismissed the change as ineffectual, saying donors would simply slice contributions into $30 pieces. To achieve transparency, he said, the government will have to proscribe cash contributions entirely, instead requiring they be made digitally so they can be traced. |
| But the main thrust of the government budget on Wednesday was to try to help the economy, which has been hurt by Mr. Modi’s cash ban, by most accounts. The International Monetary Fund cut its predicted growth rate for India by one percentage point this year to 6.6 percent, in large part because of the currency ban. | But the main thrust of the government budget on Wednesday was to try to help the economy, which has been hurt by Mr. Modi’s cash ban, by most accounts. The International Monetary Fund cut its predicted growth rate for India by one percentage point this year to 6.6 percent, in large part because of the currency ban. |
| The tax cuts for the middle class and spending increases in rural areas, where most Indians still reside, would help boost discretionary spending that had suffered after the currency ban, said Deepak Parekh, the chairman of Housing Development Finance Corporation, one of India’s largest mortgage lenders. | The tax cuts for the middle class and spending increases in rural areas, where most Indians still reside, would help boost discretionary spending that had suffered after the currency ban, said Deepak Parekh, the chairman of Housing Development Finance Corporation, one of India’s largest mortgage lenders. |
| “It is extremely well thought-out,” Mr. Parekh said of the budget, in a telephone interview, crediting the government with being “frank enough to say the economy has taken a hit” and proactive enough to provide a needed spending boost. | |
| Mr. Joshi said the government’s budget, if executed well, could help restore some of the jobs lost. In addition to plans to increase capital spending, Mr. Modi’s budget plan aims to build 10 million new affordable homes for the poor in rural areas by 2019. | Mr. Joshi said the government’s budget, if executed well, could help restore some of the jobs lost. In addition to plans to increase capital spending, Mr. Modi’s budget plan aims to build 10 million new affordable homes for the poor in rural areas by 2019. |
| “The jobless will get support if these programs are executed well,” he said. | “The jobless will get support if these programs are executed well,” he said. |