Modi steps up rural funding in last budget before election, deficit rises

Saturday, 2 February 2019 00:00 - - {{hitsCtrl.values.hits}}

NEW DELHI (Reuters): India’s Hindu nationalist-led Government poured extra money into support for farmers and a rural jobs program, delivering on Friday its last budget before a general election due by May with the clear aim of winning over votes.

Prime Minister Narendra Modi’s ruling alliance is facing discontent over depressed farm incomes and doubts over whether his policies are creating enough jobs. The Interim Budget for 2019/20 allocated Rs. 600 billion for a rural jobs program and 190 billion for building of roads in the countryside where two-thirds of Indians live.

The fiscal deficit in 2018/19 would be 3.4% of Gross Domestic Product (GDP), slightly higher than the targeted 3.3%, Acting Finance Minister Piyush Goyal told the Lok Sabha.

Goyal was standing in for Finance Minister Arun Jaitley, who was undergoing medical treatment in the United States.

The deficit was widely expected to be higher than targeted due to a combination of revenue shortfalls and increased spending ahead of the election. The benchmark 10-year bond yield fell three basis points to 7.46% once the new fiscal deficit estimate was revealed as investors showed relief that it wasn’t worse.

“India is solidly back on track and marching towards growth and prosperity,” Goyal said as Modi and lawmakers from the ruling Bharatiya Janata Party thumped their desks in appreciation.

A report in the Business Standard daily the previous day belied the Government bullishness over the economy.

It reported that the Government has been withholding an official survey that showed India’s unemployment rate at its highest in decades.

The Budget, which is interim and is likely to be followed by a full one in July, is expected to project economic growth of around 7.5% for the next financial year, while expanding capital spending on railways, roads, ports by 7-8%, and estimating an increase in revenue of about 15%, officials said.

Caption

Interim Finance Minister Piyush Goyal holds his briefcase as he arrives at the Parliament to present 2019-20 Budget in New Delhi, 1 February – Reuters