India unveils ‘development budget’

India's new government is lifting some caps on foreign investment, tightening borrowing limits and will introduce a goods and services tax as part of what it calls a “budget for growth”.

Finance Minister Arun Jaitley said Indians were “exasperated” after two years of economic slowdown. India's economy has slowed markedly in recent years, growing by 4.7% in 2013-14. In 2010-11, growth was 8.4%.

Modi's government has promised reforms aimed at creating jobs. The budget is also expected to contain measures designed to slow inflation.

“We shall leave no stone unturned in creating a vibrant and strong India,” Jaitley told reporters ahead of presenting the budget.

Jaitley told the parliament that Asia’s third largest economy would grow at a rate of 7-8% within three to four years and pledged that his government would increase caps on foreign investment in defence and insurance sectors to 49% from 26%.

He also set a fiscal deficit target of 4.1% of gross domestic product (GDP) for this year with further cuts in coming years - 3.6% in 2015-16 and 3% in 2016-17.

“We cannot leave a legacy of debt for future generations,” he said. Jaitley also spoke about plans to introduce a goods and services tax (GST) this year.

He also said the government will sell an unspecified amount of shares in debt-laden state-owned banks, which are in need of fresh equity. Other highlights of the budget include earmarking $1.13 billion (£690 million) to build 100 ‘smart cities’ and plans for more targeted food and petroleum subsidies.

Chief Economist of Yes Bank, Shubhada Rao, said that the budget was a “good beginning”.

- BBC