21 November 2018
Indians watch Finance Minister Arun Jaitley as he presents the budget in parliament.  Photo: WSJ
Indians watch Finance Minister Arun Jaitley as he presents the budget in parliament. Photo: WSJ

India budget shuns major overhaul

Investors hoping to see Indian Prime Minister Narendra Modi radically reshape economic policy and supercharge growth might soon need to re-examine their expectations.

On Saturday, Modi’s government pledged greater spending to upgrade infrastructure and said it would improve the efficiency of social welfare programs but stopped short of anything more dramatic, the Wall Street Journal reported Monday.

In presenting a US$290 billion budget to parliament, Finance Minister Arun Jaitley said “incremental change is not going to take us anywhere. We have to think in terms of a quantum jump.”

But the remainder of his remarks offered little spending and policy changes on top of an additional US$11 billion for roads, rails and other infrastructure, ghe report said.

These are a far cry from curbs in expensive subsidies and rapid privatizations of state-run banks and industrial companies that some economists had hoped to see. 

Further details on plans to end electricity shortages and simplify national and state sales taxes were also lacking.

“What the budget has done is set a broad road map for the next four or five years,” said Ashok Malik, a New Delhi-based political analyst.

“Is it big-bang, superlative? No. But it is difficult to criticize.”

Jaitley deflected criticism of the pace and ambition of the government’s policy decisions.

“People who urge us to undertake ’big-bang’ reforms also say that the Indian economy is a supergiant which moves surely but slowly,” he told lawmakers.

“Even our worst critics would admit that we have moved rapidly.”

Jaitley announced an 11 percent increase in military spending, cuts in the corporate tax rate and tighter rules to curb the flow of wealth overseas.

He also rolled out new pension, insurance and social-security programs.

“I think we’ve done a number of things here that are truly groundbreaking,” said Jayant Sinha, the minister of state for finance.

He cited the increased share of total tax revenue being transferred to state governments and the creation of a sovereign-wealth fund to invest in large infrastructure projects.

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