India’s expansion slowed in the fourth quarter, reflecting a poor monsoon rainfall that hurt farm output, underscoring the influence of agriculture in a nation aiming to become the world’s fastest growing economy.
GDP grew 6 percent from a year earlier after gaining 7.9 percent in the previous quarter, the Central Statistical Organization said in New Delhi yesterday. The government forecasts growth would quicken to 7.2 percent in the year to March.
The government yesterday also vowed to rein in its gaping public deficit with a new budget that counts on higher tax revenue and sales of stakes in state companies to sustain its flagship social spending.
Indian Finance Minister Pranab Mukherjee promised to cut the budget deficit, currently at a 16-year high of 6.9 percent, to 5.5 percent in the next fiscal year to March 2011.
“On the path of fiscal consolidation, I have given the correct signal,” Mukherjee said in a speech that also announced the reversal of some stimulus measures put in place during the global downturn to kickstart the economy.
Reducing the deficit was seen as a priority for the left-leaning government, which has promised to ensure that India’s rapid expansion benefits the nation’s hundreds of millions of desperately poor.
Mukherjee has said he will cut the deficit while increasing spending for education, jobs, agriculture, health and other sectors while cutting tax for consumers.
He is counting on a higher income from taxes generated by accelerating economic growth in Asia’s third-biggest economy, the fastest growing in the world after China.
Further revenues would be generated from an aggressive drive to sell stakes in state-owned companies and auctions of bandwidth for high-speed 3G mobile phone networks.
Mukherjee promised that the growth would be used to help fund the government’s huge social programs and infrastructure spending, seen as cornerstones of economic development.
He also hiked excise duties on non-petroleum products, crude and petroleum and on large cars and multi-utility vehicles —the first steps aimed at rolling back the giant government stimulus measures.
But he also put more money into consumer pockets, raising personal tax exemption limits.
“It is a growth-promoting budget, the stimulus withdrawal will not hurt growth stimulus and the tax concession will boost private consumption,” he said.
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