India’s budget likely to raise spending to revive growth

Indian Prime Minister Narendra Modi’s government is expected to raise spending on infrastructure and cut some personal tax in its 2020/2021 budget, government sources and economists said.

Finance Minister Nirmala Sitharaman, who will present her second full-year annual budget to parliament, could defer the earlier target of cutting fiscal deficit to 3 per cent of gross domestic product in 2020/21 by at least two years, government sources said.

This will be on top of roughly $28 billion of expenditure outlay from off-budget borrowings, as she seeks to keep the deficit in check.

Sitharaman is expected to announce a plan in the budget to invest 105 trillion rupees ($1.48 trn) in infrastructure over the next five years.

By then it hopes to make India a $5 trn economy, compared with $2.8 trn now, government sources have said.

Since taking charge in 2014, Modi has increased state spending on roads, railways, airports and ports, and has pruned state subsidies.

The budget could push privatisation and set a target of 1.5 trn rupees, the sources said.

The government has already announced plans to sell national carrier Air India and oil retailer Bharat Petroleum Corp. Ltd, along with a few others.

The budget is also expected to increase import duties on more than 50 items, including electronics, electrical goods, chemicals and handicrafts, targeting about $56 bn worth of imports from China and elsewhere.

Domestic investors expect some relief on income tax rates after a cut in corporate tax rates in last September.