India’s 2017-2018 budget targets rural areas badly affected by demonetisation

Survey expects growth to slow from 7.5 per cent to 7.1 per cent. Demonetisation has badly affected demand and increased uncertainty. Growth in defence spending has been cut despite tensions with Pakistan and China. More money will go for women, the poor, health care, and infrastructure.


New Delhi (AsiaNews) – Indian Finance Minister Arun Jaitley announced India’s Union budget for 2017-2018 with focus on rural development through investments and lower taxes in order to help low income Indians counter the adverse effect of the recent demonetisation when 500- and 1,000- rupee banknotes were pulled from circulation.

According to the new budget, the government’s efforts will be centred on rural areas, women, the poor, infrastructure, and health. In contrast, defence spending will not increase despite escalating tensions with Pakistan.

Mr Jaitley presented the 2017-2018 budget on Wednesday to the Lok Sabha, the lower house of the Indian Parliament.

Ahead of the presentation, his department carried out a survey under the government's chief economic adviser Arvind Subramanian, which found that demonetisation had had serious repercussions. The latter was aimed at fighting corruption.

In the survey, the government lowered its growth forecast for 2016-17 to 7.1 per cent, down from 7.6 per cent over the previous fiscal year. However, because of a slowdown in manufacturing and demonetisation, India's economic growth for the current fiscal year could dip to 6.5 per cent.

Speaking at a press conference in New Delhi, Mr Subramanian said that "there have been short-term costs which are real and significant". In fact, "Growth slowed as demonetisation reduced demand... and increased uncertainty," said the survey.

Overall, the budget allocation for rural, agriculture and related areas will go up by 24 per cent to 1.87 trillion rupees (US$ 28 billion).

The infrastructure sector will receive 3.96 trillion rupees (US$ 59.7 billion), compared with 2.12 trillion rupees (US$ 31.6 billion) the previous year, with 1,310 billion rupees (US$ 19.5 billion) going to railways.

Health care for the poor, the disadvantaged, women and children will get 1,846 trillion rupees (US$ 27.5 billion), of which 6,000 rupees (US$ 90) for every pregnant woman, whilst spending on "Scheduled Castes" will be 523 billion rupees (US$ 7.8 billion).

The government also wants to achieve 100 per cent electrification in rural villages by March 2018. This is why the energy sector will receive 1.26 trillion rupees (US$ 1.88 billion).

As for personal taxes, the rate will be reduced from 10 per cent to 5 per cent for incomes between 250,000 and 500,000 rupees (US$ 3,700-7,500).

Lastly, contrary to what many military analysts expected, the government had decided not to fan the fire of discord with neighbouring Pakistan, already heightened once more over Kashmir, nor compete with China's growing military budget.

Excluding pensions, spending on defence will increase by 1.63 per cent (6 per cent of the total budget) over the previous fiscal year, or 2,741 trillion rupees (US$ 40.8 billion).

According to military advisers, the increase should have been at least 2.5 points to be credible vis-à-vis India’s largest neighbours.