Indian Finance Minister Arun Jaitley on Wednesday announced a more than 10 per cent increase in the country’s defence budget for upcoming fiscal year.
India’s defence budget was increased to 2.74 trillion Indian rupees, excluding pensions, compared to previous fiscal year’s (2016-17) budget of INR 2.49tr.
The allocation is about 12.78pc of total government expenditure, which is INR 21.47tr.
This is the second consecutive increase of over 10pc in the defence budget. However, without the pension component, the increase in the budget amounts to approximately 5.8pc over the previous fiscal year.
The portion of the budget allocated to capital acquisition for the upcoming fiscal year is just over INR 0.86tr as compared to previous year’s amount of INR 0.78tr. Approximately half the funds were returned, signifying some difficulty in spending the allocated funds.
Addressing parliament, Jaitley called his fourth budget one for the poor. Yet, while vowing prudent fiscal management, he also raised his 2017-18 federal deficit target to 3.2pc of gross domestic product to cover his spending promises.
India will also ramp up spending on rural areas, infrastructure and fighting poverty, Jaitley said as he unveiled the annual budget, adding the impact on growth from the government’s cash crackdown would wear off soon.
Business back to normal after demonetisation?
Jaitley called India “an engine of global growth” but highlighted risks to its outlook from likely United States interest rate hikes, rising oil prices and signs that globalisation is in retreat.
Jaitley said the government would hike capital investment by 25.4pc. He also announced a 24 percent hike in rural and farm spending as part of Modi’s commitment to double farm incomes over five years. But there was no extra room in the budget to increase capital support for India’s troubled state banks. Jaitley said he would pump in 100 billion Indian rupees, in line with earlier plans.
In a surprise announcement, Jaitley said India would abolish the Foreign Investment Promotion Board, a government body, in a move that seeks to cut a layer of bureaucracy and make India an easier place to do business. “Abolishing the FIPB will further boost foreign direct investment,” said Pravin Kumar Agrawal, a tax partner at Deloitte Haskins & Sells.