India plans to cut budget to spur growth

India is cutting its fiscal deficit to boost social welfare spending in a bid to spur growth and reclaim its title from China as the world’s fastest-growing big economy.

Indian Finance minister Nirmala Sitharaman said yesterday, that the government would lower its fiscal deficit target to 3.3 per cent of gross domestic product for next year from 3.4 per cent.

Her Narendra Modi government would stimulate growth by expanding a pension scheme and lowering corporate tax rates, but failed to show how it would make up the deficit in revenue caused by a drop in domestic consumption.

M Sitharaman also recommended that publicly traded companies be required to offer more  stock to the general public, so as to force power sharing shareholders in some of India’s largest companies to dilute their stakes.

“ We have set the ball rolling for new India. We have showed by our deeds the principle of reform, perform, Transform can succeed” Ms Sitharaman added.

 

Modi who has won landslide victory at the recent general elections face pressure to deliver on promises of robust economic growth.

 

India has forecast GDP  will  rebound from a five year low to reach 7 per cent this fiscal year.  The forecast made in an economic survey set a target of 8 per cent average annual growth to achieve Mr Modi’s goal of a $5tn economy by 2025, almost double the present size of $2.7tn.

The report projected growth would pick up as a result of higher public investment and consumption, rising from  a five-year low of 5.8 per cent in the first quarter of 2019.