Union Budget 2015: No big bang, but emphasis on 'achieveable' double-digit economic growth
New Delhi: Finance Minister Arun Jaitley on Saturday announced a budget aimed at high growth, saying the pace of cutting the fiscal deficit would slow as he seeks to boost investment and ensure that ordinary people benefit.
Jaitley, delivering his first full-year budget since Prime Minister Narendra Modi's landslide election victory in May 2014, said growth would accelerate to between 8 and 8.5 per cent in the fiscal year starting in April.
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"India is about to take off," Jaitley, 62, said early in his speech to lawmakers. "The world is predicting that this is India's chance to fly." Jaitley said he would stand by the fiscal deficit target for the 2014/15 fiscal year, which ends March 31, of 4.1 per cent of gross domestic product.
The Central Statistics Office has recently released a new series for GDP, which involves a number of changes relative to the old series. Based on the new series, estimated GDP growth for 2014-15 is 7.4%. Growth in 2015-16 is expected to be between 8 to 8.5%. "Aiming for a double-digit rate seems feasible very soon," Jaitley said.
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But he pushed back by a year his medium-term goal of cutting the deficit to 3 per cent of gross domestic product. In 2015/16 the deficit will be 3.9 per cent of GDP, up from the 3.6 per cent target inherited from the last government.
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Reaping the benefits of low global prices for oil, India's main import, Modi's government says it is in a sweet spot with spare cash to modernize roads and railways without busting fiscal deficit and inflation targets.
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Jaitley said it was time for a "quantum leap" on reforms and that incremental change "is not going to take us anywhere", building on expectations that the 2015/16 budget would deliver big-bang reforms.
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The minister said the government would seek to boost the efficiency of a rural job creation scheme that is India's costliest welfare programme. It would also boost direct welfare payments into bank accounts, gradually replacing benefits in kind.
An overhaul of economic data has propelled India to the top of the league of fast-growing major economies, and the current account deficit is projected to fall below 1 per cent next year, which would help stabilize the rupee and build up reserves.
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But expectations for a further shift in expenditure from subsidies to infrastructure are sky high among investors who made India the best performing stock market in Asia after China last year on hopes Modi's government brings sweeping reforms to labour, tax and land laws.
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The market rally has continued in 2015 on expectations that legislative reform will push ahead stalled private investment and consumer demand, and reverse a decline in corporate earnings to make Asia's third-largest economy a global growth driver.
