NEW DELHI -- Indian Prime Minister Narendra Modi's government presented a budget on Feb. 1 that would pump in billions of dollars in agriculture, water and infrastructure projects in a bid to fix a slowing economy and fuel demand.
"Farmers desire integrated solutions covering storage, financing, processing and marketing," Finance Minister Nirmala Sitharaman said, presenting the country's budget for the financial year beginning April.
The proposal allocates 2.83 trillion rupees ($39.6 billion) for agriculture and allied activities, irrigation and rural development.
Agriculture, which contributes about 15% of the gross domestic product and employs more than 40% of India's 1.3 billion people, is under stress as the country battles an economic slowdown.
In the quarter ended last September, GDP expanded just 4.5% on the year, a further decline from the six-year low of 5% recorded in the previous three months. The government has pegged economic growth at an 11-year low of 5% for the full year ending in March.
In her marathon budget speech lasting over 2.5 hours, Sitharaman said the government has approved a mega scheme to provide piped water to all households by 2024 at a cost of 3.60 trillion rupees, while it already launched in December a 103 trillion-rupee, five-year National Infrastructure Pipeline involving projects across sectors such as housing, educational institutes, modern railway stations, airports, bus terminals and railway transportation.
In the next fiscal year, the piped water scheme would receive 115 billion rupees, and transport infrastructure would get 1.7 trillion rupees. Among other sectors, health care and education would be allocated 690 billion rupees and 993 billion rupees, respectively.
Sitharaman also said the state-run Life Insurance Corporation would sell part of its holding through an initial public offering, although she did not provide details.
The government -- which owns 100% stake in the LIC that has about 70% market share in the country -- has set a divestment target of 2.1 trillion rupees in the next financial year compared with 1.05 trillion rupees in the current fiscal year to shore up revenues.
Sitharaman said the government has revised the fiscal deficit target to 3.8% of GDP from 3.3% it set earlier for the ongoing financial year ending in March. For the year beginning April, the fiscal deficit is estimated at 3.5%. The "escape clause" provided by the Fiscal Responsibility and Budget Management Review Committee permits the government to breach its fiscal deficit target by 0.5% during severe economic stress.
The finance minister, who also announced income tax cuts for the middle class, said this budget would boost incomes and enhance purchasing power.
"I have mixed feelings [about the budget]," N.R. Bhanumurthy of the National Institute of Public Finance and Policy told the Nikkei Asian Review. "This has been presented in the backdrop of a very severe slowdown in demand. To that extent many of us had been arguing for fiscal stimulus [which the government] seems to have provided by reducing the taxes and increasing its expenditure.
"On the other hand, the government is using the 'escape clause' of 0.5%, not just [this year but also next year] and it is going to be used for the longer time than expected. [This way] you cannot bring down the fiscal deficit from 3.5% to 3% [in the near future]," he said, expressing concern that it can have some inflationary pressure in the economy.
Sangita Reddy, president of the Federation of Indian Chambers of Commerce and Industry, said the budget empowers the country, industry and individuals. The significant move of putting more money in the hands of people is visible by personal income tax reduction and rural and agriculture push, she added.
Modi, meanwhile, congratulated Sitharaman and her team for this decade's first budget "which contains both vision and action." He said the measures announced would speed up the economy, and the budget's special focus on sectors such as agriculture, infrastructure, textile and technology would increase employment generation.
However, opposition Indian National Congress leader Rahul Gandhi expressed his dissatisfaction with the budget. "Our youth want jobs. Instead they got the longest budget speech in parliamentary history that said absolutely nothing of consequence," he tweeted. Both Modi and Sitharaman "looked like they have absolutely no clue what to do next," he added.
The budget also failed to cheer the markets which functioned on Feb. 1 because of the budget. Both the benchmark 30-share S&P BSE Sensex and the NSE Nifty 50 index ended more than 2% lower.