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Narendra Modi's administration unveils first budget for India Narendra Modi's administration unveils first budget for India
(about 9 hours later)
India's government has unveiled its first budget, aimed at reinvigorating flagging growth in the emerging economic power.India's government has unveiled its first budget, aimed at reinvigorating flagging growth in the emerging economic power.
The Hindu nationalist Bharatiya Janata party, led by Narendra Modi, won a landslide victory in May with a pledge to create jobs, rein in soaring inflation, balance public finances and improve infrastructure. The Hindu nationalist Bharatiya Janata party (BJP), led by Narendra Modi, won a landslide victory in May with a pledge to create jobs, rein in soaring inflation, balance public finances and improve infrastructure.
Modi's reputation for effective, honest administration, built over more than a decade running the state of Gujarat, has won support in India's business community. However Arun Jaitley, the new finance minister, faces the tricky task of balancing the long-term need for structural reform, particularly of expensive subsidies for household items, with short-term protection of India's poor, who have been hit hard by spiralling prices. Modi's reputation for effective, honest administration, built over more than a decade running the state of Gujarat, has won support in India's business community. However Arun Jaitley, the finance minister, faces the tricky task of balancing the long-term need for structural reform, particularly of expensive subsidies for household items, with short-term protection of India's poor, who have been hit hard by spiralling prices.
Jaitley told parliament on Thursday that India's 1.2 billion people were "exasperated" after two years of economic growth of below 5% and had voted for change. The former lawyer promised to bring growth rates in Asia's third largest economy back up to 7-8%. Jaitley told parliament on Thursday that India's 1.2 billion people were exasperated after two years of economic growth below 5% and had voted for change. The former lawyer promised to bring growth rates in Asia's third-largest economy back up to 7-8%.
Amid a slew of measures aimed at bringing in foreign funds, Jaitley announced that he would lift caps on foreign investment in the defence and insurance sectors but did not entirely remove the threat of retroactive taxation, a key concern for overseas businessmen. Amid a range of measures aimed at bringing in foreign funds, Jaitley announced that he would lift caps on foreign investment in the defence and insurance sectors but did not entirely remove the threat of retroactive taxation, a key concern for overseas businessmen.
A range of infrastructure projects – particularly railways, airports and roads – were also announced in line with pre-election promises. Subsidies would be targeted better, a long-mooted uniform national sales tax pushed through, new medical colleges set up and a range of initiatives launched to encourage participation in sports, the minister said. A range of infrastructure projects – particularly railways, airports and roads – were also announced in line with pre-election promises. Subsidies would be better targeted, a long-mooted uniform national sales tax pushed through, new medical colleges set up and a range of initiatives launched to encourage participation in sports, the minister said.
Shubhada Rao, chief economist at Yes bank in Mumbai, told Reuters the budget was "a good beginning". Other analysts said that although the broad thrust of the budget was positive, it lacked radical measures to tackle the big picture. Shubhada Rao, chief economist at Yes bank in Mumbai, said the budget was "a good beginning". Other analysts said that although the broad thrust of the budget was positive, it lacked radical measures to tackle the big picture.
Senior opposition politicians accused Jaitley of stealing the policies of the ousted coalition government, which had been led by the centre-left Congress party. Sonia Gandhi, president of the Congress party, was quoted by television channels as saying the budget included nothing for the social sector. Senior opposition politicians accused Jaitley of stealing the policies of the ousted coalition government, which had been led by the centre-left Congress party. Sonia Gandhi, president of Congress, was quoted by television channels as saying the budget included nothing for the social sector.
India, despite the slow growth of recent years, is still seen overseas as one of the most attractive markets among emerging economic powers. The huge need for investment in infrastructure and a growing middle class with increasing disposable income continue to interest western investors. A stream of high ranking British visitors, including George Osborne earlier this week, have made their way to Delhi and Mumbai in a bid to boost economic ties. India, despite the slow growth of recent years, is still seen overseas as one of the most attractive markets among emerging economic powers. The huge need for investment in infrastructure and a growing middle class with increasing disposable income continue to interest western investors. A stream of high-ranking British visitors, including George Osborne this week, have made their way to Delhi and Mumbai to try to boost economic ties.
Jaitley also announced a range of social measures, including funds to improve security for women in India's cities. The country has been hit by a wave of sexual violence, including high profile cases in the capital and other major cities, in recent years. But India is a notoriously difficult environment for foreign businesses. The attraction of a potentially huge market is offset by bureaucracy, restrictions on investment, corruption, poor infrastructure and rising environmental problems.
But India is a notoriously difficult environment for foreign businesses. The attraction of a potentially huge market is offset by bureaucracy, strict restrictions on investment, corruption, poor infrastructure and rising environmental problems. The previous government amended the tax code retrospectively in 2012 to reopen a tax dispute with Vodafone after the supreme court had ruled in favour of the British mobile operator. Senior BJP officials said before the election that they would not reconsider current restrictions on foreign investment in multibrand retail, a contentious local political issue.
The last government amended the country's tax code retrospectively in 2012 to reopen a tax dispute with Vodafone after the country's supreme court had ruled in favour of the British mobile operator. Senior BJP officials said before the election that they would not reconsider current restrictions on foreign investment in multibrand retail, a contentious local political issue. The French retail giant Carrefour said on Monday that it was pulling out the country's vast retail market. It has five wholesale cash-and-carry outlets in India, where it has been active since 2010.
French retail giant Carrefour said on Monday it was closing its five stores in India, pulling out the country's vast retail market. The company has five wholesale cash-and-carry outlets in India, where it has been active since 2010. Their closure will be effective as of September, Carrefour said in a statement. Jaitley also announced a range of social measures, including funds to improve security for women in India's cities. The country has been hit by a wave of sexual violence, including high-profile cases in the capital and other major cities, in recent years.