Efforts to bolster infrastructure NEW DELHI: India's government boosted next year's farm and social spending, counting on brisk economic growth to help pay the cost of appeasing voters angered by corruption scandals and stubbornly high inflation. Economists greeted next year's budget unveiled on Monday with scepticism, saying both New Delhi's budget deficit and economic growth forecasts looked optimistic, especially given high global oil prices that may inflate its subsidy bill. Prime Minister Manmohan Singh's Congress party faces elections in five states this year amid criticism over inflation and its handling of several high-level corruption scandals and, as expected, the 2011/2012 budget was heavy on spending and light on economic reforms. One of the budget's centrepieces is a food security bill to provide cheap grains for millions of India's poor, promising some relief to those hit the hardest by high food and energy costs, but sparking worries about its huge cost. In his budget speech, Finance Minister Pranab Mukherjee said social spending would rise by 17 percent in 2011-12. That includes health spending, which would rise 20 percent in the fiscal year starting April 1. New Delhi expects Asia's third-largest economy to grow by nearly 9 percent in the next fiscal year, generating enough tax revenue to narrow the fiscal deficit to 4.6 percent of GDP from 5.1 percent this year. Consequently the government surprised markets announcing the gross market borrowing plan for the next fiscal year at 4.17 trillion rupees, below the 4.5 trillion rupee forecast in a Reuters poll. “Both the borrowing and fiscal deficit numbers have been worked out taking into account the most optimistic macro-economic scenarios, which in all likelihood is not going to be the real situation.” said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai. India's economy grew a slower-than-expected 8.2 percent in the October to December quarter from a year earlier, government data on Monday showed, though Mukherjee said it was still on track to expand 8.6 percent in the whole of 2010/2011 year. In an apparent effort to sustain buoyant growth, the government unexpectedly retained some of the tax cuts put in place to help India manage the global economic downturn. Among the few reforms that made it into the budget bill was a provision allowing foreign investment in the modern supermarket sector that investors say India needs to boost productivity and keep its growth running well ahead of inflation, which tops 8 percent. Mukherjee also announced incentives for private investment in infrastructure and steps to raise agricultural productivity.
