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India

India increases social spending

India on Monday announced a 17-per-cent increase in social spending in the annual budget. The spending plans include widespread subsidies for farmers and the poor. The government has recently dropped in opinion polls after several corruption scandals.

Reuters/Amit Dave
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“The country has carried for long enough the burden of hunger and malnutrition," Finance Minister Pranab Mukherjee said.

The government plans to spend 267.6 billion rupees (four billion euros) on the health sector in the next fiscal year, a rise of 20 per cent. Education spending is also increasing, to 520 billion rupees.

Tackling inflation, which is at more than eight per cent on an annual basis, is the focus of government economic policy.

"It (inflation) clearly remains a concern," said Mukherjee. "But I expect average inflation to be lower next year."

The rise in spending will be financed by higher tax revenues from the economy, which Mukherjee says will grow 8.6 per cent this fiscal year and nine per cent next year.

The part-privatisation of state-owned companies will also bring revenues of 400 billion rupees.

Mukherjee also announced a reform in how subsidies are paid to the poor, saying he would tackle misuse of handouts for fuel and fertilisers by setting up direct cash payments to poor families.

A national food security bill, which will provide a legal guarantee of subsidised food for low-income families, would also be introduced in the current parliamentary session.

The fiscal deficit this financial year is expected to be 5.1 per cent of GDP and to fall to 4.6 per cent in the next year.

About 40 per cent of India’s 1.2 billion population live on less than 1.50 euros a day.

Stock markets responded positively to the announcements. The main index on the Bombay Stock Exchange was up 2.23 per cent in the afternoon.

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