Big Hikes in Rural, Social Spending in India’s New Budget

Harish Tyagi/European Pressphoto Agency Finance Minister Palaniappan Chidambaram leaving his office for the Parliament House, to deliver the Budget 2013-14, on Thursday.

Finance Minister Palaniappan Chidambaram presented the Union budget in Parliament on Thursday morning. When Mr. Chidambaram walked into the Lok Sabha, or lower house of Parliament, carrying the ceremonial budget briefcase, it was eighth time he had presented the country’s annual budget, and the 82nd national budget presened in India.

As the last Union Budget to be presented before the national elections in 2014, the finance minister faced a difficult task of balancing good politics with good economics, particularly in trying to rein in a record-high national deficit.

He was, nonetheless, upbeat. “I acknowledge that the Indian economy is challenged, but I am absolutely confident that, with your cooperation, we will get out of the trough and get on to the high growth path,” he said, before presenting the budget in a speech that lasted nearly two hours. “There is no reason for gloom or pessimism,” he said. “Even now, of the large countries of the world, only China and Indonesia are growing faster than India in 2012-13.”

Here is a brief overview of the Union Budget for the fiscal year that begins April 1, 2013:

Total Expenditure:

Planned expenditure in 2013-2014 is 5.55 trillion rupees, or $103 billion, up 29.4 percent from revised estimates for the year before. Total expenditure for 2013-2014 will be 16.7 trillion rupees, up 16 percent from the total expenditure in the fiscal year 2012-2013 of 14.3 trillion rupees.

In the fiscal year 2012-2013, the government spent 96 percent of total expenditure that was budgeted.

Full year economic growth projections for the year beginning April 1, 2013:

Gross domestic product growth for 2013-2014 will be 6.1 to 6.7 percent, up from 5 percent the year before. In a budget that emphasized growth, Mr. Chidambaram said that his aim was to get back to an 8 percent growth rate. “Our mantra is, higher growth leading to inclusive and sustainable development,” he said.

Fiscal Deficit:

The fiscal deficit for the current year was contained at 5.2 percent, Mr. Chidabaram said. For the fiscal year 2013-2014, which begins April 1, the estimated fiscal deficit is 4.8 percent and the revenue deficit is 3.3 percent. By 2016-2017, the finance minister said, he aimed to bring down fiscal deficit to 3 percent and revenue deficit to 1.5 percent

Trade:

The current account deficit, caused by high oil, coal and gold imports and a slowdown in exports is a “bigger worry” than the fiscal deficit, the finance minister said. In order to finance the current account deficit, foreign investment must be increased, he said.

Over the next two years, $75 billion is needed to finance the current account deficit, Mr. Chidambaram said.

Rural Spending

The budget for the Ministry of Rural Development will rise by a staggering 46 percent, to 802 billion rupees, or $14.9 billion.

Anupam Nath/Associated Press A farmer working on his field in Mayong, Assam.

Agriculture Spending:

The Union budget 2013-2014 allocated 270 billion rupees, or $5.02 billion to the Agriculture Ministry, an increase of 22 percent from the previous budget.

Food Security:

The National Food Security Bill, which will provide subsidized food to poor people, is a “promise” of the United Progressive Alliance government, the finance minister said, and he hopes that the Parliament will pass the bill soon. The budget has set aside 100 billion rupees ($1.86 billion) for costs likely under the food security bill, he said.

Daniel Etter for The New York Times A government-run clinic at a village in Uttar Pradesh.

Health and Education

“Health for all and education for all remain our priorities,” Mr. Chidambaram said. In 2013-2014 he allocated 373 billion rupees, or $6.93 billion to the Ministry of Health and Family Welfare. This includes 212 million rupees for the National Health Mission, a program to improve healthcare in rural India, an increase of 24.3 percent from the year before.

He also proposed to provide rupees 47 billion rupees, or $878 million for medical education, training and research.

B Mathur/Reuters Indian Army tanks at the Republic Day parade in New Delhi.

Defense Spending:

Allocations for defense in the upcoming year rose by 4.5 percent from the year before, to 2 lakh crore, or 2 trillion rupees. In 2012-2013 fiscal year, defense spending allocation was 1.94 trillion rupees ($38.7 billion), up 17.6 percent over the year before.

Taxes: Tax rates will remain the same, the finance minister said, but there will be a one-time surcharge imposed on the 42,800 Indians who report income of more than 10 million rupees ($186,000) to the tax department. This will be imposed for one year only, he said, adding that he hoped these rich Indians would feel a little of the spirit of Azim Premji, the Wipro founder and philanthropist.

Rajesh Kumar Singh/Associated Press A vendor counting money in Allahabad, Uttar Pradesh.

Disinvestment:

Revenue from the sale of state-owned assets in the upcoming year will reach, the budget predicts. That’s UP/DOWN from 2012-13 projections of 30,000 crore rupees, or 300 billion rupees ($5.9 billion).