A scientist works in a laboratory at the Indian Serum Institute, the world’s largest manufacturer of vaccines, working on vaccines against coronavirus disease (COVID-19) in Pune, India on May 18, 2020.
Euan Rocha | Reuters
SINGAPORE – India’s Finance Minister Nirmala Sitharaman unveiled the country’s budget for the fiscal year beginning April 1 and ending March 31, 2022 on Monday.
Speaking to Parliament, she proposed that India’s spending on health and wellbeing should more than double to 2.2 trillion rupees ($ 30.1 billion). This includes a new federal program worth Rs. 641 billion over six years to expand the country’s capacity for primary, secondary and tertiary care, as well as to strengthen national institutions and new facilities to detect and cure new diseases to create, said Sitharaman.
India’s health spending as a percentage of its GDP is comparatively much lower than many other countries.
The budget comes at a time when India’s growth prospects remain uncertain. South Asia’s largest economy fell into a technical recession last year due to a protracted lockdown to slow the spread of the coronavirus outbreak. The Indian Ministry of Statistics announced last month that according to advanced data, the economy still contracted 7.7% in the current fiscal year.
“I would like to confidently say that our government is fully ready to support and facilitate the resetting of the economy,” Sitharaman told parliament. “This budget gives our economy every opportunity to reach the pace it needs for sustainable growth.”
The budget is 350 billion rupees for Covid-19 vaccines and the government is required to provide additional funding if necessary, according to the finance minister.
India launched a mass vaccination program last month that aims to vaccinate 300 million people in the first phase, most of them frontline workers and those over 50 or in risk groups. The country has the second highest number of Covid-19 cases worldwide with more than 10.7 million reported infections. However, data suggests that the number of newly reported cases is falling.
In addition to health care, the budget on Monday also focused on infrastructure spending, as well as setting up a financial institution to fund that spending, monetizing assets and recapitalizing banks.
“The infrastructure needs long-term debt financing,” said Sitharaman. “A professionally managed development finance institution is necessary to act as a provider, enabler, and catalyst for infrastructure finance.”
She added that she would introduce a bill to set up the institution with Rs 200 billion to capitalize on it.
Sitharaman said the government’s budget deficit for the current fiscal year ending March 31 is set at 9.5% of GDP, far exceeding targets set in the last few years before the pandemic.
To ensure the economy gets the boost it needs, the Treasury Secretary said for the next fiscal year the deficit target would be 6.8% of GDP – that includes an estimated 5.54 trillion rupees (about $ 80 billion) in investment which is an increase of 34.5% from a year ago.
The budget’s focus on health and infrastructure spending was what many economists had expected.
“The timely implementation of the plethora of targeted budget announcements will be the key to sustaining the current recovery in growth and helping the Indian economy to achieve a higher growth path in the medium term,” said Aditi Nayar, chief economist at ICRA, the Indian subsidiary of Moody’s.
Some of the measures announced on Monday include:
Health care and wellbeing
- A new federal program costing Rs.641 billion over six years to develop the country’s capacity for primary, secondary and tertiary care.
- Support for 17,788 rural and 11,024 urban health and wellness centers and strengthening of the National Center for Disease Control
- A program to provide clean water to urban areas and liquid waste management over a five year period valued at Rs.287 trillion.
- Voluntary vehicle scrapping policy to remove old vehicles that contribute to India’s poor air quality.
- The government will allocate 1.97 trillion rupees over five years to an existing production-linked incentive system to improve the scope and size of key sectors.
- Monetization plans for public infrastructure assets, including rail freight corridors and airports.
- An allocation of 1.18 trillion rupees to the Department of Roads and Highways, most of which are for investment.
- An allocation of Rs.1.1 trillion for railways, most of which is for investment.
- Around 3 trillion rupees would be allocated to modernize India’s power distribution sector over a five-year period.
- India will ease the cap on FDI in the insurance sector from 49% to 74%.
- Public Sector Banks Received Rs 200 Billion Infusion To Recapitalize.
- An asset recovery company is formed to take over existing toxic assets and find ways to manage them and sell them to alternative mutual funds.
- Plans to take two public sector banks and a general insurance company private as part of the government’s divestment strategy.
- Around 15 billion rupees will be allocated to encourage the use of digital payments.