India yesterday made a steep hike in its defence spending and outlined measures to boost farmers and the poor and infrastructure as Finance Minister Pranab Mukherjee presented in parliament the first budget of the Congress-led UPA government in its second term.
Apparently to put procurement of defence equipment on a fast-track and plug security gaps after the deadly terror attacks in Mumbai, the country's financial hub, last November, the budget raised the budgetary allocation for defence to Rs 141,703 crore ($28.4 billion), a 34 percent increase over the previous fiscal year.
The 34 percent increase is substantial compared to the increase of only 10 percent in last year's budget over Rs 96,000 crore allocated in 2007-08.
Despite the hike this year, India's defence spending is still at about 2 percent of GDP, compared to China's 7
percent and Pakistan's 5 percent.
Adhering to the theme of "inclusive growth" espoused by the Congress party-led alliance in recent parliamentary polls that returned it to power with a clear mandate in May, the budget unveiled direct subsidies for farmers, breaks in income tax for salaried class, commodity transaction and fringe benefit tax for the corporate sector and service tax incentives for exporters hit by global economic downturn.
In his two-hour budget speech, Mukherjee said "the first challenge is to return the GDP growth rate of 9 percent per annum at the earliest" and "the second challenge is to deepen and broaden the agenda for inclusive development".
The first budget of Prime Minister Manmohan Singh's new government is viewed as the economic roadmap for how he will govern for the next five years after its electoral triumph.
Senior citizens (above the age of 60) and women were given income tax breaks, as the slab for computing taxable income has been pushed up by Rs 15,000 and Rs 10,000 respectively.
Among the highlights of the budget are increased allocation for national highways development, for urban poor schemes to Rs 39.73 billion in 2009-10, targeting agriculture credit of Rs 3.25 trillion, payment of additional interest subvention of 1 percent to farmers who pay short-term farm loans on schedule, additional Rs 10 billion over interim budget for irrigation, extension of waiver of agriculture debt by six months, allocation of Rs 40 billion to encourage lending to small firms.
The budget provided more funds to some of the flagship programmes of the UPA government for rural and urban development, allocating Rs 391,000 crore for national rural employment guarantee programme, extending farm loan waiver scheme by six months and envisaging Rs 12,887 crore for Jawaharlal Nehru Urban Renewal Mission scheme.
Mukherjee, who announced a total investment of Rs 100,000 crore for infrastructure development, called on states to remove bottlenecks for infrastructure projects, and outlined plans for more flexible financing for infrastructure and development of long-distance gas pipelines.
The budget has extended the tax holiday for exporters to the year 2012 and for textile units till April next year.
Not constrained by its previous alliance with Left parties who suffered their worst defeat in recent polls, the budget announced offloading of government equities up to 49 percent in public sector undertakings but ruled out privatisation of banks and insurance companies.
At the same time, the finance minister promised "inclusive growth" to support social programmes and rural development.
India's economy, Asia's third-largest, grew at 6.7 percent in the most recent fiscal year, held back by the global downturn, after expanding at least 9 percent for three straight years.