NEW DELHI (Reuters) - India's Finance Minister Arun Jaitley announced a budget for growth on Saturday, saying the economy was ready to "fly" and that the government would boost investment and ordinary people should benefit.
Mr Jaitley said economic growth would accelerate to between 8 per cent and 8.5 per cent in the fiscal year starting in April. "India is about to take off," Mr Jaitley, 62, told lawmakers after rising to deliver his first full-year Budget since Mr Modi's landslide election victory last May.
He forecast inflation at 5 per cent by the end of the fiscal year ending March 2016, undershooting the Reserve Bank of India's 6 per cent target and creating room to cut interest rates. Annual inflation was 5.1 per cent in January.
"The world is predicting that this is India's chance to fly," Mr Jaitley said, adding he would stand by the fiscal deficit target for the 2014/2015 fiscal year, which ends March 31, of 4.1 percent of gross domestic product.
But he pushed back by a year his medium-term goal of cutting the deficit to 3 per cent of gross domestic product. In 2015/16 the deficit will be 3.9 per cent of GDP, up from the 3.6 per cent target inherited from the last government.
India's NSE share index was up 0.2 per cent at 6.25am GMT in a special Saturday trading session, paring earlier gains of as much as 1 per cent after Mr Jaitley's deficit announcement. "The 3.9 per cent number will be negative for the markets," said Mr Ananth Narayan, regional head of global markets at Standard Chartered in Mumbai.
India's budget concentrates a year's economic policymaking into a single speech, and the range of measures Mr Jaitley announced included a monetary policy overhaul, a bankruptcy code and the creation of a public debt management agency.
Mr Jaitley, who underwent surgery last year to treat his diabetes, sat down around 20 minutes into his speech and continued to deliver his address from the government's front bench.
Reaping the benefits of low global prices for oil, India's main import, Mr Modi's nationalist government says it is in a sweet spot with spare cash to modernise roads and railways without busting fiscal deficit and inflation targets.
Mr Jaitley announced an increase of 700 billion Indian rupees (S$15.6 billion) in road and rail investments next year and announced that the government would commission five "ultra-mega" generation projects to end chronic power shortages.
The government would seek to boost the efficiency of a rural job creation scheme that is India's costliest welfare programme. It would also boost direct welfare payments into bank accounts, and gradually replace benefits in kind.
Mr Jaitley said it was time for a "quantum leap" on reforms and that incremental change "is not going to take us anywhere", building on expectations that the 2015/16 budget would deliver big-bang reforms.
The minister said the government would seek to boost the efficiency of a rural job creation scheme that is India's costliest welfare programme. It would also boost direct welfare payments into bank accounts, gradually replacing benefits in kind.
An overhaul of economic data has propelled India to the top of the league of fast-growing major economies, and the current account deficit is projected to fall below 1 percent next year, which would help stabilise the rupee and build up reserves.
But expectations for a further shift in expenditure from subsidies to infrastructure are sky high among investors who made India the best performing stock market in Asia after China last year on hopes Mr Modi's government brings sweeping reforms to labour, tax and land laws. "The settings are just right for Finance Minister Arun Jaitley to shun gradualism and go for broke," the Hindustan Times wrote in an editorial.
The market rally has continued this year on expectations that legislative reform will push ahead stalled private investment and consumer demand, and reverse a decline in corporate earnings to make Asia's third-largest economy a global growth driver.