In his last full year budget before a national election that must be held by May 2019, Finance Minister Arun Jaitley spoke of massive spending on rural infrastructure, to win over voters in the countryside where two-thirds of India’s 1.3 billion people live.
Farm incomes have fallen and Prime Minister Narendra Modi’s administration has failed to deliver enough jobs to employ the mass of Indian youth joining the labour market and moving to its overcrowded cities each year.
But Jaitley said economic growth was picking up and that Asia’s third largest economy was “firmly on path to achieve 8 percent plus growth soon.”
Gross domestic product is expected to grow 6.5 percent to 6.75 percent in 2017/18 — its slowest pace in three years.
To keep investors on side however, Jaitley will have to convince them that he plans to keep to his word on working towards reining in the fiscal deficit, one of Asia’s largest.
Bond yields in India’s benchmark 10-year bond rose 4 basis points after the government said its fiscal deficit would be 3.3 percent of GDP in 2018/19, compared to a previously projected level of 3 percent.
A Reuters poll this week showed most economists expected a 3.2 percent deficit in 2018/19.
It also revised its fiscal deficit for the ongoing 2017/18 year to 3.5 percent of GDP, as widely expected by the markets, given the decline in tax revenues following the rollout of the goods and services tax in 2017.
He also announced the launch of a flagship health insurance scheme that would cover over 100 million poor families and give up to 500,000 rupees ($7,860) in medical coverage for each family annually.
“This will be the world’s largest health protection scheme,” said Jaitley.
The healthcare scheme announcement spurred a rally in shares of healthcare stocks like Apollo Hospitals, Thyrocare Technologies and Narayana Hrudayalaya in trading on Thursday.