The budget is finally here. India unveiled a massive spending plan focused on healthcare and infrastructure on Monday, as the government sought to boost a corona virus-ravaged economy on course for its biggest annual contraction on record.
The planned expenditure of US$30.6 billion on health and well-being schemes was more than double the equivalent outlay in the previous budget, although it included US$4.8 billion for the country’s ambitious COVID-19 immunisation drive, with plans to vaccinate 300 million by July.
The nation of 1.3 billion was badly hit by one of the world’s strictest virus lockdowns, with growth slumping by a historic 23.9% in April-June, and the economy expected to contract 7.7% in 2021-21.
Unveiling the annual budget Finance Minister Nirmala Sitharaman said, “This budget provides every opportunity for our economy to rise and capture the pace that it needs for a sustainable growth.”
The health sector has long suffered from chronic underinvestment. As of 2017, the country had 0.8 doctors per 1,000 people, around the same level as Iraq, according to the World Bank.
Asia’s third-largest economy was in the throes of a slowdown even before the pandemic, during which it has recorded the second-highest number of corona virus cases at 10.7 million.
Infrastructure was another big-ticket item, with some US$76 billion 34.5% more than in the previous budget to be sunk into major projects including roads and railways. Divestments, including national carrier Air India and part of the government’s stake in the country’s largest insurer, Life Insurance Corporation would help to raise US$24 billion, Ms. Sitharaman said.
But the sales of both state-run firms have been on the cards for some time, with the mooted IPO of the insurer sparking a walk-out by nearly 100,000 staff last year.
With lenders also struggling with a mountain of bad debt, Ms. Sitharaman said $2.74 billion would be put aside for the next financial year to recapitalise state banks.
Social security benefits, including minimum wages, will be extended to workers in the gig economy, which has flourished amid cheap mobile data and abundant labour.
The raft of spending measures will blow out the fiscal deficit to 9.5% of GDP for the financial year ending March, Ms. Sitharaman said, from a forecast of 3.5%.
The government plans to borrow an additional US$1.1 billion to fund the deficit, she said.
In its annual economic survey, the government said there would be a “V-shaped” recovery after the severe contraction, forecasting growth to hit 11% in the 2021-22 financial year.