India Hopes to Revive the Economy with Its New Budget
India's government unveiled a new budget aimed at reviving its pandemic-battered economy, with a focus on vaccinations and doubling on health care spending.
India's economy shrank by the astonishing 23.9 per cent in the first quarter of last year and is projected to record its worst-ever annual recession – a contraction of 7.7 per cent - in the current financial year ending March 31.
Finance Minister Nirmala Sitharaman told parliament that the government is fully prepared to support and facilitate the economy's reset. He claimed that the budget provides enough opportunities for India economy to race and capture the pace that it needs for a sustainable growth.
“Now, just as it happened after the two World Wars, there are signs that the political, economic and strategic relations in the post-Covid world are changing. This moment in history is the dawn of a new era, one in which India is well-poised to truly be the land of promise and hope,” she added.
The government will allocate 30.6 billion dollars toward health care spending, marking an increase of 137 per cent, Sitharaman said. This was a big boost for India’s health sector that is often neglected with public health expenditures at just 1.3 per cent of its domestic product (GDP).
A new federal scheme will be launched with an outlay of about 8.8 billion dollars to upgrade health care infrastructure at the primary, secondary and tertiary level over the next six years.
Sitharaman also committed 4.81 billion dollars to developing vaccines as well as for the vaccination programme, adding that two further Indian vaccines were likely to be announced this year.
India has the world's second largest coronavirus caseload after the United States, with a total of more than 10.75 million infections and 154,392 deaths. There has been a decline in new cases in recent months.
Sitharaman said the Covid-19 relief packages announced in 2020 were like mini-budgets, with a total impact of 371 billion dollars, which amounts to 13 per cent of GDP.
The government also raised foreign direct investment in the insurance sector from 49 per cent to 74 per cent, adding that foreign ownership and control with safeguards would be allowed.
There was a 34-per-cent increase in capital expenditure compared to last year and a push to large-scale infrastructure projects in Indian states.
The government also plans an ambitious 24-billion-dollar divestment target from state-owned companies this year, which includes the cash-strapped national carrier, Air India.
After an estimated 7.7-per-cent contraction, various surveys have projected a rebound in excess of 11 per cent for the Indian economy in the upcoming financial year beginning April 1 that would make India one of the fastest-growing economies in the world.
However, economists say that this is partly due to statistical reasons and would mean a growth in real GDP by 2.4 per cent over the absolute level of 2019-20, implying the economy would take two years to surpass pre-pandemic levels.
Indian markets cheered the budget proposals to revive growth.
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