Budget sets out road map for recovery after virus shock

Presented every February 1, it sets the agenda on a wide range of issues including taxes and bank stability to defense and farming, with ramifications across India’s 1.3 billion people, from day laborers to billionaires.

India unveiled a new budget stressing a commitment to self-reliance as it seeks to revive growth from an unprecedented recession due to the coronavirus outbreak.

As finance minister Nirmala Sitharaman unveils her budget, she confronts an economy scarred by increased informality in the labour market, a shrunken micro, small and medium enterprises (MSME) sector, and economic activity moving to large firms who are incentivised to generate profits rather than employment. (Sanjeev Verma/HT PHOTO)

“The government is fully prepared to support and facilitate the economy’s reset,” Finance Minister Nirmala Sitharaman said Monday in Parliament as she presented the annual budget.

Benchmark stocks were trading up 1.3% at 11 am in Mumbai, when she started speaking, set to snap six days of losses.

The federal spending plan, officially known as the Union Budget, is among India’s most highly anticipated and closely watched annual events, more so this year as Prime Minister Narendra Modi’s government seeks to recover from the country’s deepest-ever recession amid one of the world’s worst coronavirus outbreaks.

Presented every February 1, it sets the agenda on a wide range of issues including taxes and bank stability to defense and farming, with ramifications across India’s 1.3 billion people, from day laborers to billionaires.

The new budget, for the fiscal year starting April 1, also comes as the nation’s financial sector faces increasing pressure from a growing pile of bad loans, escalating border tensions with China and widespread anger from farmers, whose protests against market reforms overwhelmed parts of the capital New Delhi last week.

Sitharaman had pledged before Monday that the government would look beyond fiscal deficits in its aim to revive Asia’s third-largest economy, which is expected to outpace the global recovery.

The government’s annual economic report card, released Friday, forecast an 11% rebound in the coming fiscal, following an estimated 7.7% contraction in the current year. The Reserve Bank of India will make its next rate decision this Friday. The central bank has paused rate cuts since the middle of last year due to sticky inflation, which has recently shown signs of easing, opening the door for further stimulus.