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India's new government proposes reformist budget

India's new government has proposed a first budget, focussing on promoting manufacturing and infrastructure, reducing deficits, and overhauling populist subsidies. Foreign investment rules are also set to be eased.

Finance Minister Arun Jaitley outlined the broad strokes of the

government's economic plan

to parliament on Thursday, and introduced his first budget. He said the new budget would represent a departure from the "mere populism and wasteful expenditure" that has burdened Asia's third-largest economy.

Two-thirds of India's 1.25 billion people live on less than two dollars a day. Subsidised food and energy are among a wide range of benefits aimed at the poor. Jaitley said subsidies would in future be "more targeted", but gave no details.

The finance minister promised gradually shrinking government deficits, with a target of 4.1 percent this financial year and 3.0 percent three years hence. Jaitley hopes to raise GDP growth to seven or eight percent over the same time frame, from less than five percent currently.

Jaitley also announced that limits on

foreign investment

in insurance firms and military supply companies would be raised to 49 percent from 26 percent.

Voters dissatisfied with widespread corruption, rampant inflation and slowing economic growth threw out India's long-governing Congress Party in May's national election. The Hindu nationalist Bharatiya Janata Party

swept into power with a resounding win

, led by Narendra Modi, formerly Chief Minister of Gujarat. The BJP gained a majority of seats in parliament, and so will be able to govern without the support of other parties. That means Jaitley's budget is likely to be approved.

js/uhe (AP, AFP)

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