India pledges infrastructure spending to help economy 'fly'

NEW DELHI: India's finance minister pledged major investment in infrastructure on Saturday, saying it was time for the economy to "fly", as he unveiled the new right-wing government's first full budget.

Arun Jaitley said his government had inherited an economy dominated by "doom and gloom" when it took power last year, trumpeting its achievements in conquering inflation and kick-starting growth.

"The credibility of the Indian economy has been reestablished. The world is predicting this is India's chance to fly," he said.

Prime Minister Narendra Modi swept to power last year on a pledge to revive India's flagging economic fortunes and provide jobs for its rapidly growing population of over 1.2 billion.

But he has been criticised for failing to push through the concrete reforms experts say India needs if it is to attract much-needed foreign investment.

On Saturday Jaitley said the government would increase spending on the country's crumbling roads, railways and ports by $11.3 billion in 2015/16 as it seeks to win back investment and boost growth.

He said the government would complete 100,000 kilometres of roads currently under construction and build another 100,000 kilometres.

The government will set up tax-free infrastructure bonds to finance its plans through a national fund that would receive a 200-billion-rupee ($3.2 billion) injection of public money.

"It is quite obvious that incremental change is not going to get us anywhere," said the finance minister.

"We have to think in terms of a quantum jump."

Analysts have said the government's challenge will be to balance its spending with the need for fiscal restraint.

Jaitley said the government would achieve its goal of cutting the fiscal deficit to 4.1 percent of gross domestic product (GDP) for 2014/2015 from 4.5 percent the year before.

But he said it would delay by a year the goal of cutting the deficit to 3 percent, forecasting a figure of 3.9 percent in 2015/16.

"Although possibly controversial... and against economist expectation, the pushing out of meeting (the) fiscal deficit target by a year shows pragmatism in bringing in additional public investments for infrastructure development," said Nilaya Varma, the head of government services for consultants KPMG in India.