New Delhi - India's government unveiled its annual budget Monday which aimed to return to a growth rate of 9 per cent annually and promised to step up allocations for welfare schemes and infrastructure. The budgetary plans to hike spending to encourage growth, pushing fiscal deficit to a higher-than-expected 6.8 per cent of the gross domestic product, led equity markets to plummet more than 6 per cent.
The federal budget was presented in parliament by Finance Minister Pranab Mukherjee, two months after the Congress Party-led United Progressive Alliance returned to power for its second term. India's financial year runs from April 1 to March 31.
The global economic recession slowed India's high growth rate last year to 6.7 per cent, from 9 per cent in the preceding three years.
Mukherjee said the government recognized the challenges even as there were signs of recovery with the country having possibly passed through the worst of the economic crisis.
"The first challenge is to bring back the GDP growth rate to 9 per cent per annum at the earliest," Mukherjee said, adding the second challenge will be to "deepen and broaden the agenda for inclusive development."
Mukherjee said the UPA government will push an ambitious agenda to add 12 million jobs each year and halve poverty by 2014, the IANS news agency reported.
According to World Bank estimates last year, 455 million people or more than 40 per cent of the total population live under the global poverty line of 1.25 dollar per day.
The finance minister pledged to boost rural development and social initiatives including new incentives to farmers, a 45 per cent jump in funds for rural reconstruction.
He also announced that national food security legislation would be enacted soon to provide 25 kilograms of rice or wheat per month to the poor at 3 rupees per kilogram.
Higher spending on urban development, a new impetus on energy security were highlights and a slew of tax sops were the highlights of the budget.
Mukherjee said the industrial sector was rebounding as foreign investors returned to Indian markets in recent months.
"It is possible that the two worst quarters since the global financial meltdown in September 2008 are behind us," he said.
Indians have been hoping that the alliance headed by economist and Prime Minister Manmohan Singh, which secured a new term in May, will get the economy back on the trajectory of high growth, place emphasis on job creation and boost welfare policies.
But equity markets plummeted after the budget was announced, with the benchmark Sensex shedding nearly 950 points, as investors worried about how the government will fund its increasing deficits.
Market analysts said the trading sentiment was weak as the budget was interpreted as populist with no real push for economic reforms.
The 30-share sensitive index was trading at 13,966.36 down 946.69 points or 6.35 per cent at 3.00 pm (0930 GMT). The broader 50-share Nifty index of the National Stock Exchange, also tanked 6.31 per cent to 4,145.05 at the same time.
