India's finance minister has unveiled the annual budget amid slowing economic growth and increasing pressure to reduce the fiscal deficit. | India's finance minister has announced an unexpected rise in public spending for the next financial year in an attempt to revive its sluggish economy. |
P Chidambaram said India faced a number of challenges to return to its potential growth rate of 8%. | However, he vowed to cut the country's deficit as he unveiled new taxes on the super rich as well as large businesses. |
He said the high fiscal and current account deficits and inflation were areas of concern. India had to embrace growth "unhesitatingly", he said. | P Chidambaram said that increased foreign investment was key to reviving growth in India's economy. |
India has suffered a sharp slowdown in its manufacturing and services sectors. | The budget comes at a time when India's growth rate has slowed, hurt by both global and domestic factors. |
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. | Asia's third-largest economy is projected to grow by 5% in the current financial year, far below the 7.6% growth projected in last year's budget. |
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. | In his budget speech, Mr Chidambaram said that while restoring India's potential growth remained a challenge, "there is no room for gloom and pessimism". |
'Major worry' | He argued that China and Indonesia were the only Asian nations that were growing faster than India, and that achieving a high growth rate was "not beyond India's capacity". |
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. | "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". | |
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. | |
Among other highlights: | |
- There will be a new bank for women - the first of its kind in India
- 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. | |
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. | |
"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." | |
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. | |