NEW DELHI (AFP) - India’s newly re-elected government promised yesterday an easing of foreign investment rules and more infrastructure spending in an effort to boost flagging growth rates and create jobs.
India has been leap-frogged by China as the world’s fastest-growing major economy, with unemployment in Asia’s third-biggest economy at its highest since the 1970s.
In the first budget since Prime Minister Narendra Modi won a landslide in May, Finance Minister Nirmala Sitharaman said she wanted to boost foreign direct investment (FDI) in several sectors.
“The government will examine suggestions of further opening up FDI in aviation, media, and, insurance sectors in consultation with stakeholders,” said Sitharaman, India’s first female finance minister.
Sitharaman, 59, also said India’s public sector banks would be injected with US$10.2 billion in additional capital to tackle bad loans.
A sudden collapse of India’s shadow banking sector in 2018 and bad loans had resulted in a liquidity crunch in Asia’s third-largest economy.
“Sitharaman’s budget focused on something for every industry including tax relief for startups and thrust on infrastructure spending,” Mumbai-based independent economist Ashutosh Datar told AFP.
The government on Thursday predicted India will rebound and grow at 7.0 percent this year and also outlined plans on how to meet the target of doubling its economy by 2025 to US$5 trillion.
“It is high time India gets fully integrated into the global value chain of production of goods and services but also becomes part of the global financial system to mobilize global savings,” Sitharaman added.
The annual growth in the last fiscal year remained at 6.8 percent, down from 7.2 percent in 2017-18, too slow to create enough jobs for the more than a million Indians entering the labour market every month, economists say.
India is ranked as the world’s sixth-biggest economy just behind Britain and ahead of France. The US and China occupy the first and second spots with US$19 trillion and US$12 trillion.
On Thursday, India’s chief economic advisor K.V. Subramanian laid out a strategic blueprint for achieving India’s growth goals through a ‘virtuous cycle’ of savings, investment and exports.
Modi, who had faced sharp attacks for failing to create jobs, lauded Sitharaman’s plans it as a “green budget focusing on environment, electric mobility and solar sector”.
“This budget is a roadmap for new India and is one of hope. It will transform agriculture sector of the country,” Modi said.