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India’s New Government’s Budget Is Aimed At Reviving Economy

Posted by: : Paul EbelingPosted on: July 11, 2014 India's New Government's Budget Is Aimed At Reviving Economy

India’s New Government’s Budget Is Aimed At Reviving Economy

India’s new government Thursday unveiled its new budget promising to revive the country’s economy, lifting caps on foreign investment, tightening borrowing limits, including plans to introduce a goods and service tax, and more spending on defense and infrastructure.

Presenting the budget for the FY 2014-2015 at the Parliament, Indian Finance Minister Arun Jaitley said the country’ s economy would grow at a rate of 7 to 8 percent in the next three to four years, while spurning the temptation to resort to higher borrowing.

The government also raised caps on foreign investment in the defense and insurance sector from 26% to 49% , assuring foreign investors fair treatment.

The Indian stock market, which was flat Thursday mornning, cheered when the Finance Minister vowed to adhere to the “daunting” budget deficit target of 4.1% of the GDP (gross domestic product) this fiscal as set by the prior Congress-led government with further cuts in coming years.

“We cannot leave behind a legacy of debt for future generations, ” he said.

The FM also spoke about plans to introduce a goods and services tax this year, promising clarity on the same by the year-end.

In a bid to boost infrastructure, the government said that it plans to spend US$ 1.13-B will also be used in building 100 “smart cities” as promised by Prime Minister Narendra Modi, apart from pushing investment in factories, roads and ports.

The Finance Minister also announced that spending on defense would be boosted by 12% to US$38.35-B to help modernize India’s military. India has been the world’s top buyer of arms for the last 3 yrs.

Talking about subsidies

The FM indicated that there were plans to end expensive but popular subsidies on food and fuel. “The subsidies cost India US$40-B. It will be overhauled to make them more targeted,” he said.

The Finance Minister also spoke of boosting employment opportunities; in fact, Mr. Modi pledged creation of 100-M jobs for the youth in his election manisfesto. He also reiterated the government’s commitment to provide round-the-clock power supply and sanitation in every home.

The government gave some personal income tax relief to the country’s salaried class, much to the relief of the middle-class which largely voted for the Bharatiya Janata Party (BJP) during the general elections.

Though the government has made cigarettes costlier but at the same time, mobiles, cars and latest TV sets would cost less.

India’s economic survey, a financial report card, published Wednesday, said that the country’s fiscal situation was worse than it appeared. It forecast GDP growth of between 5.4 and 5.9% in FY 2014-15, but warned that weak monsoon rains could affect it.

Stay tuned…


Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.

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