India’s budget offers tax relief amid slow economic growth

Govt projects economy will grow by up to 6.5% in next fiscal year

NEW DELHI, Feb 1, (AP): India’s government on Saturday offered relief to taxpayers and vowed to spend billions to double farmers’ incomes and upgrade infrastructure, healthcare and industry to boost the country’s lowest economic growth in a decade.

Finance Minister Nirmala Sitharaman presented to Parliament the budget for fiscal year 2020-21, which starts April 1, saying expenditures will total $434.6 billion, up from $385.6 billion in the current year.

She said the government plans to spend $39.8 billion for agriculture and allied activities, $9.9 billion for health, $3.9 billion for industry and commerce, and $628.6 million to combat worsening air pollution in the country.

Income tax will be lowered by 5-10% for people earning above 500,000 rupees ($7,140) a year. Those those earning less than 500,000 rupees will pay no tax, up from 250,000 rupees currently, she said.

The Press Trust of India news agency said the minister cut short her speech in Parliament because she felt unwell after speaking for more than two hours, the longest budget speech by an Indian finance minister.

Sitharaman had two pages left when she stopped after asking Speaker Om Birla to consider the remaining part of her speech as read, PTI said. She later recovered.

Earlier, she said the fiscal deficit for the current year would widen to 3.8% of gross domestic product compared to the targeted 3.3%. She set the fiscal deficit at 3.5% for fiscal 202021.

She also announced that the government will reduce its stake in the government-run Life Insurance Corporation as part of its divestment program to raise resources. Last week it announced the selling of Air India.

Sitharaman said 100 more airports will be developed in the country by 2024 to boost the aviation sector. She also announced an allocation of $3 billion for the power and renewable energy sector in 2020-21.

Loknedra Ranawat, an industrialist, said the budget allocations would create a better environment for industry and commerce.

India is facing its worst economic slowdown in a decade, with economic growth this year slipping to 5%.

The government projects the economy will grow by up to 6.5% in the next fiscal year and hopes to follow China’s example in developing laborintensive industries and exports.

The upbeat assessment is at odds with the International Monetary Fund’s decision earlier this month to downgrade its estimate for the country’s 2019-20 economic growth to 4.8% from the 6.1% expansion it projected in October. The IMF cited a sharper-than-expected slowdown in local demand and stresses in the nonbank financial sector.

Many economists believe Prime Minister Narendra Modi’s signature economic policies are at least partly to blame for the slowdown. A surprise demonetization in 2016 and the hasty roll out of a goods and services tax were blows to manufacturing, especially the auto industry.