New Delhi. India on Monday pledged to reduce its deficit while ramping up social spending as the government unveiled an annual budget aimed at balancing populism with pragmatism.
High food inflation and a spate of embarrassing corruption scandals have put pressure on India’s ruling Congress Party in recent months, spooking foreign investors and sparking protests in advance of crucial state elections.
In his budget speech before parliament, Finance Minister Pranab Mukherjee revealed no major policy shifts, but said the much-watched fiscal deficit would fall from an estimated 5.1 percent of gross domestic product in the year ending on March 31 to 4.6 percent next fiscal year. Some analysts found that target to be overly optimistic.
The government expects the economy to grow as much as 9.25 percent next fiscal year, up from 8.6 percent in the year ending on March 31, but policy makers worry about the unevenness of that growth.
“The economy has shown remarkable resilience to both external and domestic shocks,” Mukherjee said. “Our primary concern this year has been continued high food prices.”
India’s poor have been hit hardest by food prices, which have soared thanks to increasing demand and woefully inadequate storage and distribution.
Mukherjee pledged to introduce a food security bill next fiscal year, which would provide cheap grain to hundreds of millions of poor people, prompting fears of spiraling subsidy costs.
His budget also includes incentives to invest in agriculture, but stopped short of opening India’s retail sector to more foreign investment — a contentious step some analysts believe is the only way to attract the necessary funds to expand the nation’s food supply chain.
Mukherjee also pledged to clamp down on corruption, which has helped drive much-needed foreign investment out of the country.
“Corruption is a problem that we have to fight collectively,” Mukherjee said, also pledging to stem the flow of so-called black money to overseas tax havens.