Manoj Kumar, Suvashree Choudhury
NEW DELHI — India said on Thursday it expected economic growth to surge above 8 percent as it announced a 2018/19 budget that allocated billions of dollars for rural infrastructure and unveiled a health insurance program for around 500 million poor.
In his last full year budget before a national election that must be held by May 2019, Finance Minister Arun Jaitley spoke of massive spending on rural infrastructure, to win over voters in the countryside where two-thirds of India's 1.3 billion people live.
Farm incomes have fallen and Prime Minister Narendra Modi's administration has failed to deliver enough jobs to employ the mass of Indian youth joining the labor market and moving to its overcrowded cities each year.
But Jaitley said economic growth was picking up and that Asia's third largest economy was "firmly on path to achieve 8 percent plus growth soon."
Gross domestic product is expected to grow 6.5 percent to 6.75 percent in 2017/18 — its slowest pace in three years.
While growth has been slowed by the botched rollout of a nationwide goods and service tax (GST) in 2017, and a shock move to ban high value currency notes in late 2016, investors have so far looked beyond the setbacks, perceiving the initiatives as positive long term.
To keep investors on side however, Jaitley will have to convince them that he plans to keep to his word on working towards reining in the fiscal deficit, one of Asia's largest.
Bond yields in India's benchmark 10-year bond rose 4 basis points after the government said its fiscal deficit would be 3.3 percent of GDP in 2018/19, compared to a previously projected level of 3 percent.
A Reuters poll this week showed most economists expected a 3.2 percent deficit in 2018/19.
It also revised its fiscal deficit for the ongoing 2017/18 year to 3.5 percent of GDP, as widely expected by the markets, given the decline in tax revenues following the rollout of the goods and services tax in 2017.
Delivering his opening statement, Jaitley switched from English to Hindi as he outlined schemes to promote agriculture, organic farming, animal husbandry and fisheries, ensuring that he was understood by people living in rural areas.
He also announced the launch of a flagship health insurance scheme that would cover over 100 million poor families and give up to 500,000 rupees ($7,860) in medical coverage for each family annually.
"This will be the world's largest health protection scheme," said Jaitley.
The healthcare scheme announcement spurred a rally in shares of healthcare stocks like Apollo Hospitals, Thyrocare Technologies and Narayana Hrudayalaya in trading on Thursday.
(Reporting by Delhi and Mumbai bureaux; Writing by Euan Rocha and Sanjeev Miglani, Editing by Simon Cameron-Moore)