Finance minister Arun Jaitley said on Thursday it expected economic growth to surge above 8% as it announced a 2018/19 budget that allocated billions for rural infrastructure and unveiled a health insurance programme for around 500 million poor.
In his last full year Budget before a national election that must be held by May 2019, Jaitley spoke of massive spending on rural infrastructure, in an attempt to woo voters in the countryside where two-thirds of India’s 1.3 billion people live.
Farm incomes have fallen and Prime Minister Narendra Modi’s administration has not delivered enough jobs to employ the mass of Indian youth joining the labour market and moving to its overcrowded cities each year.
But Jaitley said economic growth was picking up and that Asia’s third largest economy was “firmly on path to achieve 8% plus growth soon.”
Gross domestic product is expected to grow 6.5% to 6.75% in 2017/18 — its slowest pace in three years.
While growth has been slowed by the botched rollout of a nationwide goods and service tax (GST) in 2017, and a shock move to ban high value currency notes in late 2016, investors have so far looked beyond the setbacks, perceiving the initiatives as positive long term.
To keep investors on side however, Jaitley will have to convince them that he plans to keep to his word on working towards reining in the fiscal deficit, one of Asia’s largest.
Bond yields in India’s benchmark 10-year bond rose 4 basis points after the government said its fiscal deficit would be 3.3% of GDP in 2018/19, compared to a previously projected level of 3%.
A Reuters poll this week showed most economists expected a 3.2% deficit in 2018/19.
It also revised its fiscal deficit for the ongoing 2017/18 year to 3.5% of GDP, as widely expected by the markets, given the decline in tax revenues following the rollout of the goods and services tax in 2017.
Delivering his opening statement, Jaitley switched from English to Hindi as he outlined schemes to promote agriculture, organic farming, animal husbandry and fisheries, ensuring that he was understood by people living in rural areas.
Jaitley has also announced a sharp increase in agricultural exports to help increase prices for farmers. Exports of agricultural products have long been restricted by regulations. The government will also help in building more than 5 million affordable houses for the poor in the next financial year.
He announced the launch of a flagship health insurance scheme that would cover over 100 million poor families and give up to Rs 500,000 in medical coverage for each family annually.
“This will be the world’s largest health protection scheme,” said Jaitley.
The healthcare scheme announcement spurred a rally in shares of healthcare stocks like Apollo Hospitals, Thyrocare Technologies and Narayana Hrudayalaya in trading on Thursday.