India’s government announced billions of dollars of state funding to help the sprawling farm sector in its 2020/21 federal budget on Saturday, aiming to get broader economic growth back up from its lowest in a decade.
India’s Finance Minister Nirmala Sitharaman arrives at her office before leaving for parliament to present the federal budget in New Delhi, India, February 1, 2020. REUTERS/Anushree Fadnavis
Finance Minister Nirmala Sitharaman, presenting the budget for the financial year beginning April 1 to parliament, said there was a need to liberalise farm markets and the government was committed to doubling farmers’ income by 2020.
Agriculture accounts for 15% of India’s gross domestic and a source of livelihood for more than half of the country’s 1.3 billion population.
Sitharaman said 2.83 trillion Indian rupees ($39.82 billion) will be allocated for agriculture and allied activities including helping farmers set up solar power generation units as well as establish a national cold storage to transport perishables.
“Farm markets need to be liberalized, farming need to be made more competitive” she said.
India is grappling with its worst economic slowdown in a decade. The government estimates economic growth this year, which ends on March 31, will slip to 5%, the weakest pace since the global financial crisis of 2008-09.
In its annual economic report, released on Friday, the government predicted that growth would rebound to 6.0% to 6.5% in the fiscal year beginning April 1, but warned that it may have to exceed its deficit target to revive growth.
“People have reposed faith in our economic policy,” said Sitharaman to the thumping of desks in parliament. “This is a budget to boost their income and enhance their purchasing power.”
She is expected to announce a further step up in state funding on infrastructure and loosen the fiscal deficit target to allow for the increased expenditure.
Sitharaman also set aside 690 billion rupees for the health sector, up marginally from last year’s allocation as the government seeks to implement an ambitious scheme to provide health insurance for millions of people.
Economists in a Reuters poll predicted the government would set a fiscal deficit target of 3.6% of GDP for 2020/21, up from 3.3% targeted for the current year.
Some experts said global trade tensions and the outbreak of coronavirus in China, which has killed more than 250 people so far, pose a new risk to economic recovery by hitting cross-border commerce and supply chains.
“The economic recovery is likely to be slow and shallow despite the recent measures to boost investments,” said Anagha Deodhar, an economist at ICICI Securities.
Indian shares got off to a choppy start in a special trading session on Saturday ahead of the budget.
In early trade shares slipped in reaction to an overnight shakeout in global markets on growing concerns about the economic impact of the coronavirus outbreak in China.