India set to present federal budget

Measures aimed at reviving India’s slowing economy are set to be announced by the country’s new government, led by Prime Minister Narendra Modi, in its federal budget on Thursday.

India’s economy has slowed markedly, growing by 4.7 per cent in the 2013-14 financial year which marked the second year of sub-5 per cent growth.

Modi’s government has promised reforms aimed at creating jobs.

The budget is also expected to contain measures designed to slow inflation.

The government has also spoken about its plans to introduce a general sales tax, simplify taxation, encourage foreign investment and speed up approvals for major business projects.

A government survey, published on Wednesday, said the country’s fiscal situation was worse than it appeared.

The annual government Economic Survey on India’s economy heightened speculation that Thursday’s budget will give a higher, more realistic fiscal deficit target for the current financial year than the 4.1 per cent of gross domestic product the previous government set.

“Inflation needs to be moderated further. The fiscal deficit needs downward correction over the next two years,” said Finance Minister Arun Jaitley, who will present Thursday’s budget.

The report forecast GDP growth of between 5.4 per cent and 5.9 per cent in 2014-15, but warned that weak monsoon rains, which are essential for farming, could keep growth closer to 5.4 per cent.

Last year, credit ratings agency S&P warned there was a one-third chance of a downgrade of India’s credit rating to “junk” without a big improvement in the fiscal deficit and in implementing reforms.

Modi won a landslide general election victory in May with a pledge to boost growth and create jobs for the one million people who enter India’s workforce every month.