NEW DELHI — India’s finance minister, Arun Jaitley, unveiled the first full-year budget of Prime Minister Narendra Modi’s government on Saturday, promising to boost growth with a major increase in public spending on infrastructure and to lower the corporate tax rate by 5 percent, steps that were cheered by Indian industry.
Those moves were balanced by the relaxation of targets for spending cuts and the introduction of a new social security plan to provide subsidized insurance and pensions for poor Indians.
Though Saturday is usually a trading holiday, India’s financial markets opened for the much-anticipated budget speech, but neither they, nor most analysts, detected the dramatic reforms that some of Mr. Modi’s supporters have been urging.
The speech came against a sunny economic backdrop in India, especially in comparison to other developing economies. The government now predicts a growth rate of 7.4 percent in the current fiscal year, more than 8 percent next year and proceeding to double digits thereafter. Meanwhile, falling commodity prices have helped to curb India’s chronic budget deficits, a development that Raghuram G. Rajan, the governor of the Reserve Bank of India, described as “a $50 billion gift for the economy.”
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Several of the changes most ardently desired by investors could not be achieved in the budget, and instead require Mr. Modi to navigate a polarized legislature.
Among them is the liberalization of a highly restrictive 2013 law governing land purchases, which requires buyers to secure the consent of 80 percent of landowners on the property. Mr. Modi’s government has submitted an executive ordinance that would eliminate the consent clause and the requirement of a social impact assessment if land is to be used in certain ways – for industrial corridors, and affordable housing, among others – but needs the approval of both houses of parliament for it to take effect. The new government has yet to propose changes to India’s stringent labor laws, which has also deterred would-be builders of large factories.
Hari Kumar contributed reporting.
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