Central Government unveiled a spending plan worth almost a half-trillion dollars as Prime
Minister Narendra Modi’s government seeks to dig Asia’s third-largest economy out of a
pandemic-induced slump.
Fueled by a bigger-than-expected spending deficits and borrowing, as well as sales of
government assets and dividends from state firms, the ₹35 trillion ($480 billion) budget sent
bonds tumbling and stocks rallying. It also aims to bolster the nation’s financial stability,
including setting up a company to manage a growing pile of bad loans.
The Central Govt's spending plan, delivered by Finance Minister Nirmala Sitharaman on
Monday, is among India’s most highly anticipated and closely watched annual events, and more
so this year as Modi’s government seeks to recover from the country’s deepest-ever recession.
The new budget also comes as the nation’s financial sector faces increasing pressure from an
expected record level of bad loans this year, escalating border tensions with China and
widespread anger from farmers, whose protests against market reforms overwhelmed parts of the
capital New Delhi last week.
It will be followed by the Reserve Bank of India’s rate decision Friday, with expectations for
policymakers to possibly resume rate cuts as inflation cools.

“The government is fully prepared to support and facilitate the economy’s reset," Sitharaman
said. “This budget provides every opportunity for our economy to rise and capture the pace it
needs for a sustainable growth."
The fiscal deficit next year is expected at 6.8% of gross domestic product, Sitharaman said.
That’s wider than the 5.5% forecast in a Bloomberg survey. The deficit will be 9.5% for the
current year, against a planned 3.5%, she said.
The government will borrow about ₹12 trillion to meet the shortfall, less than the record this year
but below the expected ₹10.6 trillion estimated in a Bloomberg survey before the budget was
released.
Sitharaman had pledged before Monday that the government would look beyond fiscal deficits in
its aim to revive Asia’s third-largest economy, which is expected to outpace the global recovery.
India’s predicament isn’t unique: Other emerging-market heavyweights are also seeing their
fiscal deficits balloon as they buttress their economies against the pandemic. China’s deficit is
projected to rise to 11.8% for 2020 and 11% for 2021, according to International Monetary Fund
data, while Brazil’s is seen at 14.5% for 2020 before reverting to its pre-pandemic level of 5.9%
this year.
“Sitharaman’s budget announcement surprised the markets with fiscal stimulus that was sharply
higher than expected for the year ending in March and the following fiscal year. It marks a
reversal of the fiscal contraction in recent years that had driven a slowdown even before the virus
hit," says Abhishek Gupta, India economist
Sitharaman more than doubled the outlay for health care in the wake of the pandemic, while also
keeping the focus on attracting investments and growing businesses. She proposed increasing the
foreign investment cap in insurance to 74% from 49%, planned to set up separate firms to
manage stressed debt held by banks and to buy investment-grade bonds to boost confidence in
the nation’s corporate debt market.
(With inputs from agencies)