India's Finance Minister Nirmala Sitharaman, in presenting her maiden Budget yesterday, focused on pushing foreign investment, announced more spending on infrastructure and promised to cut red tape to boost economic growth as part of efforts to turn the country into a US$5 trillion (S$6.8 trillion) economy in the next few years.
Ms Sitharaman's Budget was the first from the government of Prime Minister Narendra Modi, who swept back into office with a landslide win in May's general elections after vowing to boost economic growth and national security.
Ms Sitharaman said she wanted to make India more attractive to foreign direct investment and was looking into opening up the economy in areas such as aviation, insurance, media and animation.
"We have set the ball rolling for a new India," she declared in her speech. "We shall further simplify procedures, incentivise performance, reduce red tape and make the best use of technology. Big structural reforms, in particular, in indirect taxation, bankruptcy and real estate will be carried out."
While proposing a cut in the tax rate to 25 per cent for medium-sized companies, she at the same time hiked taxes on the super rich by increasing the surcharge on those with a taxable income of between 25 million and 50 million rupees (S$496,000 and S$994,000) by 3 per cent, and 7 per cent for those with more than 50 million rupees.
"Those in the highest income brackets need to contribute more to the nation's development," Ms Sitharaman said.
Gold and petrol were also targeted, with Customs duty on the precious metal raised from 10 per cent to 12.5 per cent, and an additional 1 rupee cess on a litre of petrol and diesel. The allocation for defence went up marginally, by 0.01 per cent, to 4.31 billion rupees.
Mr Modi called the Budget "citizen friendly, development friendly and future oriented".
But analysts were cautious, saying that much depended on implementation on the ground where investments have been bogged down due to a host of issues - from low availability of capital to problems of land acquisition and delay in labour reforms, including facilitating the hiring and firing of workers.
The Modi government, which presented an interim Budget in February focusing on rural India and the poor, is facing a tough challenge in its second term.
The economy, while remaining among the fastest growing in the world, is showing signs of distress.
In January and March, annual growth slowed to 5.8 per cent. Car sales are falling, rural wages have continued to stagnate and unemployment hit a 45-year high of 6.1 per cent in the financial year which ended in March last year.
Analysts noted that the government is clearly following China's route by focusing on investment-led growth.
Mr Rishi Sahai, managing director of investment bank Cogence Advisors, said: "This is a radical strategy. But it requires a huge amount of execution and implementation of policies like changes in laws and regulations in areas like land acquisition, labour reforms, faster resolution of disputes between private sector or regulator and low cost of capital."
Top industry bodies reacted positively to the Budget, with Mr Chandrajit Banerjee, director-general of the Confederation of Indian Industry, describing it as a "popular Budget without being populist".