India’s Finance Minister Nirmala Sitharaman lowered the deficit target for the fiscal year ending March 31, 2020 as the government aims to tax the wealthy and enhance divestment.
In her first budget speech, Sitharaman told lawmakers the government aims to cut the fiscal deficit target to 3.3 percent of GDP in 2019-20 from the previous projection of 3.4 percent set in the interim budget. The shortfall for 2018-19 was estimated at 3.4 percent.
The budget 2019-20 plans to raise funds through taxing high income group and the divestment of public sector undertakings, while focusing on infrastructure spending.
“Those in the highest income brackets, need to contribute more to the Nation’s development,” Sitharaman said. The government also enhanced its divestment target to INR 1.05 trillion.
As India requires $300 billion investment every year, the minister proposed a number of measures to raise capital for infrastructure financing. Sitharaman announced plans to sell the first global bonds.
The government will permit 100 percent foreign direct investment in insurance intermediary. The ministry invited suggestions for further opening up of FDI in the aviation, media and insurance sectors.
Also, the government reduced corporate tax. Accordingly, firms with annual turnover up to INR 4 billion need to pay 25 percent corporate tax. Earlier, the turnover limit was INR 2.5 billion.
The government proposed INR 700 billion capital to public sector banks.
She said the government will invest in infrastructure and job creation. The government plans to upgrade 125,000 kilometers of roads over the coming five years.
Government imposed a cess on petrol and diesel. Further, the custom duty on gold and other precious metals was raised to 12.5 percent from 10 percent.
The minister said India will become a $3 trillion economy in the current fiscal year. Now, India is the sixth largest in the world.
The Economic Survey, released Thursday, envisaged a growth of 7 percent for FY 2020.
However, India needs to sustain a real growth of 8 percent to achieve the objective of becoming a $5 trillion economy by 2024-25, which will make the economy the third largest in the world.
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