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India outlines challenges to growth India budget to push economic growth
(about 1 hour later)
India's finance minister has begun unveiling the annual budget amid slowing economic growth and increasing pressure to reduce the fiscal deficit. India's finance minister has unveiled the annual budget amid slowing economic growth and increasing pressure to reduce the fiscal deficit.
P Chidambaram said India faced a number of challenges to return to its potential growth rate of 8%.P Chidambaram said India faced a number of challenges to return to its potential growth rate of 8%.
He said the high fiscal and current account deficits and inflation were areas of concern. India had to embrace growth "unhesitatingly", he said.He said the high fiscal and current account deficits and inflation were areas of concern. India had to embrace growth "unhesitatingly", he said.
India has suffered a sharp slowdown in its manufacturing and services sectors.India has suffered a sharp slowdown in its manufacturing and services sectors.
Mr Chidambaram said restoring India's potential growth remained a challenge "but there is no room for gloom and pessimism". The finance minister announced a 16% rise in public spending, saying he had "retrieved some economic space" thanks to recent austerity measures, including slashing subsidies.
He said only China and Indonesia were growing faster than India, and achieving high growth was "not beyond India's capacity." He pledged to cut India's public deficit to 4.6% of the GDP in the next financial year beginning in April, from 5.2% in the current financial year.
"We have done it and we will do it again," he said.
'Major worry''Major worry'
Mr Chidambaram said restoring India's potential growth remained a challenge, "but there is no room for gloom and pessimism".
He said only China and Indonesia were growing faster than India and achieving high growth was "not beyond India's capacity".
"We have done it and we will do it again," he said.
Mr Chidambaram said the high current account deficit fuelled by high oil, coal and gold imports was a "major worry".Mr Chidambaram said the high current account deficit fuelled by high oil, coal and gold imports was a "major worry".
He said India needed to "find" $75bn (£49bn) to finance the deficit and it could be done through foreign investment and external commercial borrowings.He said India needed to "find" $75bn (£49bn) to finance the deficit and it could be done through foreign investment and external commercial borrowings.
"India at the present juncture does not have the choice of welcoming and spurning foreign investment. We need to welcome foreign investment," Mr Chidambaram said."India at the present juncture does not have the choice of welcoming and spurning foreign investment. We need to welcome foreign investment," Mr Chidambaram said.
Correspondents say Mr Chidambaram is likely to announce steps to tighten spending to restore confidence in public finances. Among other highlights:
"We expect the government to announce some populist schemes - but all within the limits of fiscal prudence," economist Sonal Varma told the AFP news agency.
  • There will be a new bank for women - the first of its kind in India
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  • Nearly $2bn will be allocated to combating malnutrition, a move which many believe will help the governing Congress party in general elections next year.
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Mr Chidambaram's budget comes at a time when the economy is projected to grow by 5% this fiscal year, far below the 7.6% growth projected in last year's budget.Mr Chidambaram's budget comes at a time when the economy is projected to grow by 5% this fiscal year, far below the 7.6% growth projected in last year's budget.
A finance ministry forecast on Wednesday, however, said India's growth rate in 2013-14 would be between 6.1% to 6.7%.A finance ministry forecast on Wednesday, however, said India's growth rate in 2013-14 would be between 6.1% to 6.7%.
However, the survey calls for more action on job creation and widening the tax base.However, the survey calls for more action on job creation and widening the tax base.
"The slowdown is a wake-up call for increasing the pace of actions and reforms," finance ministry chief economic advisor Raghuram Rajan said on Wednesday. "The slowdown is a wake-up call for increasing the pace of actions and reforms," finance ministry chief economic adviser Raghuram Rajan said on Wednesday.
"These are difficult times but India has navigated such times before and with good policies it will come through stronger." "These are difficult times, but India has navigated such times before and with good policies, it will come through stronger."
However, recent government reforms to open retail, insurance and aviation sectors to foreign investment as a way of stimulating growth have sparked opposition.However, recent government reforms to open retail, insurance and aviation sectors to foreign investment as a way of stimulating growth have sparked opposition.
Last week, all India's major unions held a two-day strike, in part prompted by the reform plans.Last week, all India's major unions held a two-day strike, in part prompted by the reform plans.