A research scientist works inside a laboratory of India’s Serum Institute, the world’s largest maker of vaccines, which is working on vaccines against the coronavirus disease (COVID-19) in Pune, India, May 18, 2020.
Euan Rocha | Reuters
SINGAPORE — India’s finance minister, Nirmala Sitharaman, presented the country’s budget Monday for the fiscal year that begins April 1 and ends March 31, 2022.
In her speech to Parliament, she proposed more than doubling India’s health-care and wellbeing spending to 2.2 trillion rupees ($30.1 billion). That includes a new federal scheme with an outlay of 641 billion rupees over six years to develop the country’s capacity for primary, secondary and tertiary care as well as to strengthen national institutions and create new ones to detect and cure new diseases, Sitharaman said.
India’s health-care 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 sank into a technical recession last year due to a lengthy lockdown to slow the spread of the coronavirus outbreak. India’s statistics ministry said last month that advanced data indicated the economy still shrank 7.7% for the current fiscal year.
“I want to confidently state that our government is fully prepared to support and facilitate the economy’s reset,” Sitharaman told Parliament. “This budget provides every opportunity for our economy to race and capture the pace that it needs for a sustainable growth.”
The budget will allocate 350 billion rupees for Covid-19 vaccines and the government is committed to providing further funds if required, according to the finance minister.
India last month rolled out a mass immunization program that aims to inoculate 300 million people in its first stage, most of them frontline workers and those above 50 or in high-risk groups. The country has the second-highest number of Covid-19 cases in the world, with more than 10.7 million reported infections. But data suggests the number of new reported cases is falling.
Apart from health care, Monday’s budget also focused on infrastructure spending, as well as plans to set up a financial institution to fund those expenditures, asset monetization, bank recapitalization among others.
“Infrastructure needs long-term debt financing,” Sitharaman said. “A professionally managed development financial institution is necessary to act as a provider, enabler and catalyst for infrastructure financing.”
She added that she will introduce a bill to set up the institution with 200 billion rupees to capitalize it.
Sitharaman said the government’s fiscal deficit for the current fiscal year that’s due to end on March 31 is pegged at 9.5% of GDP, which far exceeded the targets set in recent years before the pandemic.
To ensure the economy receives the boost it needs, the finance minister said for the next fiscal year, the deficit target would be around 6.8% of GDP — that includes an estimated 5.54 trillion rupees (about $80 billion) in capital expenditure, up 34.5% from a year ago.
The budget’s focus on health-care and infrastructure spending was in line with what many economists were expecting.
“Timely implementation of the plethora of well-targeted budget announcements, will hold the key for sustaining the nascent growth revival that is currently underway, and helping the Indian economy attain a higher growth trajectory over the medium term,” said Aditi Nayar, principal economist at credit ratings agency ICRA, the Indian affiliate of Moody’s.
Some of the measures announced Monday include:
- A new federal scheme with an outlay of 641 billion rupees 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 as well as strengthening the National Center for Disease Control
- A program to provide clean water in urban areas as well as liquid waste management over five years and allocated 2.87 trillion rupees.
- Voluntary vehicle scrapping policy to phase out old vehicles that contribute to India’s poor air quality.
- The government will commit 1.97 trillion rupees over five years for an existing production-linked incentive scheme aimed at improving scale and size of important sectors.
- Monetizing plans for public infrastructure assets including railway freight corridors and airports.
- An allocation of 1.18 trillion rupees to the roads and highways ministry, most of which will be designated for capital spending.
- An allocation of 1.1 trillion rupees for railways, most of which will be for capital expenditure.
- Around 3 trillion rupees over five years would be allocated to revamp India’s power distribution sector.
- India will relax the foreign-direct investment cap in the insurance sector from 49% to 74%.
- Public sector banks will receive an infusion of 200 billion rupees for recapitalization.
- An asset reconstruction company will be set up to take over existing toxic assets and find ways to manage and dispose them to alternative investment funds.
- Plans to take two public sector banks and one general insurance company private as part of the government’s disinvestment strategy.
- Around 15 billion rupees will be allocated to promote the use of digital payments.