India's finance minister has presented the much anticipated budget. Spending focuses on education, health and infrastructure, while outlays for the military are being reduced.
"Our budget is a signal for the whole world that we have taken the smart economic path," Indian Finance Minister Palaniappan Chidambaram told parliament.
The minister unveiled a spending plan totaling $309 billion (206 billion euros), an increase of 16 percent over last year.
The biggest loser is the military. The defense budget was increased by a very modest five percent, compared to 17 percent the previous year, and is currently some 40 billion dollars. By comparison, US defense expenditures amounted to 500 billion dollars last year and China's were 110 billion.
In March 2012, the supreme commander of Indian forces, Vijay Kumar Singh, wrote a letter to Prime Minister Manmohan Singh describing as "alarming" the state of the Indian military. He warned not to neglect the modernization of the army. Since independence in 1947, nuclear power India has fought three wars against Pakistan and a brief, but intense border war with China. In addition, India provides a large contingent to UN peacekeeping forces.
How much military hardware does India need?
"The government has no alternative but to focus on other areas if it intends to reach its goal of lower national debt," said economist Praveen Jha of Jawaharlal Nehru University in New Delhi in an interview with DW. "There has been repeated criticism in the past that India's funding of the military was disproportionately high; in fact, more than necessary to ensure the security of the country at home and abroad."
A study by the Stockholm-based peace research institute, SIPRI, lists India as the world's 7th largest purchaser of armaments. One eye-catching purchase was the announced plan to buy 126 French Rafale fighter jets for some 7.5 billion dollars, one of the largest military deals worldwide in recent years. India is particularly keen to modernize its air force. It is also planning to buy 400 helicopters, as well as drones and other weapons systems. Several corruption scandals, however, have delayed these investments.
Cost-cutting vs. hunt for votes
Finance Minister Chidambaram hopes to reduce India's government debt considerably. At the same time, however, he is cautious not to overstretch political sympathies. In 2014, the world's largest democracy goes to the polls to elect a new parliament, and Chidambaram is one of the possible candidates for the post of prime minister. He is an experienced politician who, on the one hand, wants to curry favor within his own Congress Party, while attracting as many voters as possible.
India's media has described the latest budget as a plan designed "to hurt no one" while "holding something for everybody."
"When talking about a budget that was born with elections in mind, then you have to spend in a way that interests the masses. That is why a main focus was on the issue of food security," said economist Jha.
A lot of attention was paid to the agricultural sector as well. Despite all the talk about, and success of, India's IT and telecommunications sectors, two thirds of the country still lives from farming, or is indirectly dependent on it, noted Jha.
Opening the country
India is currently confronted with a veritable mountain of problems. It is the world's 10th largest economy and the 3rd largest in Asia. While India's neighbor and rival, China, still enjoys healthy growth, despite the repercussions of the global financial crisis, India has had to correct its growth forecasts downward.
Estimates for this year put India's growth rate at around 5 percent, the worst in more than a decade. Steadily rising inflation, widespread corruption and decrepit infrastructure have scared away potential foreign investors.
Leading ratings agencies have repeatedly warned against doing business in India. "We do not have the luxury to discuss whether we should welcome or refuse foreign investment. Foreign investment is urgently needed," Finance Minister Chidambaram told parliament. "Doing business in India must be viewed as simple, uncomplicated and profitable for all sides concerned," he added.