New Delhi (AsiaNews/Agencies) – India's government unveiled its annual budget for the coming fiscal year. It projects the growth rate for the current fiscal year (which ends 31 March) to reach 8.5 per cent, and 9 per cent in 2012. Whilst inflation remains a problem with prices growing faster than growth (the current rate is 8.4 per cent), Finance Minister Pranab Mukherjee said it should come down in the next 12 months. Still, with food price inflation at 17 per cent, there is cause for concern, the minister said, because it affects disproportionately lower income families and the country’s millions of poor.
The government may also cut personal income tax and boost spending on food subsidies and rural jobs to buffer citizens against rising prices. To increase food supplies and ease inflation, Mukherjee is expected to focus on agriculture, with low interest loans and incentives to improve storage and irrigation facilities and modernise antiquated manual farming methods. The goal is to hold down the prices of basic staples like fruit and vegetable.
With the World Bank estimating that more than three-quarters of the people live on less than US$ 2 a day, the rising cost of sugar and onions can be particularly devastating.
Understandably, the government said it wants to fight poverty and help the millions who cannot make ends meet, whilst at the same time stop environmental degradation caused by industrial development.
Yet, its budget proposal has come in for criticism. Some object to the shift in focus away from the middle class to rural communities. Until recently, economic policies favoured consumption and the urban middle classes at the expense of rural incomes, which fuelled the rural exodus.
Experts note the government has also another important obstacle to overcome, namely the loss of public confidence in its capacity to govern following a string of corruptions scandals involving top officials. This was illustrated last Wednesday, when thousands of workers from across India led by trade unions marched in New Delhi to protest rising food prices and corruption.
India has to upgrade its infrastructure whilst maintaining its subsidy policy, all this without increasing the debt. The latter declined to 5.1 of the GDP this fiscal year, down from 6 per cent last year, and should drop to 4.6 per cent next year, Minister Pranab Mukherjee said.
According to International Monetary Fund estimates, India’s national budget deficit, including state government finances, should reach 8.5 percent of GDP in 2011.
Now everyone is waiting to see the details of the government’s plans in order to measure their impact.
This year, elections are set to take place in five states, which should indicate what prospects the government has.