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Wednesday 20 August 2014

India budget sees anger over statue

Published 10/07/2014 | 08:48

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Indian finance minister Arun Jaitley arrives to present the 2014-15 union budget at the Indian parliament in New Delhi (AP)
An Indian worker carries a sack containing copies of the 2014-15 budget

A newly announced budget in India has attracted criticism after setting aside two billion rupees (£19 million) for a colossal iron-and-bronze statue almost twice the size of the Statue of Liberty.

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The plans for a 182-metre (nearly 600 foot) replica of Indian independence leader Vallabhbhai Patel have caused an outcry, with many people saying the country has far more urgent priorities.

"How can they waste money on statue like that?" asked Rohtash, a vegetable vendor in the Indian capital. "The government could have used that money to reduce the price of rice. That would have been some help for poor people like us."

It was the first budget of a new government elected on promises to revive stalled economic growth.

Others lamented how the budget earmarks more money for the statue than for women's safety nationwide, which got 1.5 billion rupees (£14.6 million), or the education of young girls at a billion rupees (£9.6 million).

The move was criticized strongly on social media, with one sarcastic Twitter user saying: "Truly #budget2014 has something for everyone, even Sardar Patel."

The move was rated "most disliked" on the website of NDTV news channel, and the Times of India newspaper started a Twitter poll asking if the statue is a "wasteful expenditure".

The statue, which Indian officials say will be the tallest in the world, will stand on an island in the Narmada River in western Gujarat state, where Prime Minister Narendra Modi was chief minister for more than a decade.

The project was originally meant to be financed by the local government and donations of iron and cash from across the country.

Critics of Mr Modi say the decision to lavish federal funds on the project is a political ploy to upset his foes in the rival Congress party.

Mr Patel was one of the most important members of the Congress party, which dominated Indian politics for almost 60 years after the country won its independence from British rule.

Mr Modi, who belongs to the Hindu nationalist Bharatiya Janata Party, humiliated Congress when he came to power in May in the most decisive election victory India has seen in three decades.

Now, his critics say, he is trying to appropriate one of the Congress' most revered independence-era icons.

Elsewhere, the budget focused on promoting manufacturing and infrastructure as well as expanding the tax base.

The budget for the fiscal year ending March 2015 is being closely watched as an indicator of whether Mr Modi's government will act quickly to will deliver on economic promises.

Finance minister Arun Jaitley outlined the broad strokes of the plan, which he said would be a departure from the "mere populism and wasteful expenditure" that has dragged down Asia's third-largest economy.

"The people of India have decidedly voted for change," he said in opening his speech to parliament.

Mr Jaitley said it would be daunting to keep the budget deficit for the year at 4.1% of gross domestic product, as targeted by the previous government, and it might end up at 4.5%.

In the two subsequent years it is forecast to fall to 3.6% and 3% of GDP respectively.

He indicated those reductions would involve overhauling expensive subsidies for food, fuel and fertiliser that cost India's government some 40 billion US dollars (£23 billion) a year. He said the subsidies would be "more targeted".

Investors welcomed the budget, with the Sensex stock index rising 1.6%. Expectations for a pro-growth budget were high and the index hit a series of record highs in the weeks before.

Mr Jaitley said the government could not rely only on spending cuts to reduce the budget deficit and should also work to spur economic growth back to 7-8%, which would result in higher tax revenue.

He said that a revival of manufacturing and building of new infrastructure are ways to provide jobs. He announced schemes to promote investment in factories, roads and ports.

Mr Jaitley also announced that limits on foreign investment in the defence and insurance industries would be raised to 49% from 26%.

In some quarters there was disappointment that the government held back from an immediate and radical slashing of the previous government's populist policies, which provide a social safety net but also swell the budget deficit.

"There was a sense that this budget would an opportunity for the government to break away from the principles, the world views of the previous government. It did not do that," said Jahangir Aziz, head of Asian emerging markets for JP Morgan Chase.

The combination of infrastructure spending and relaxation of foreign investment curbs helped soften the disappointment that the government did not slash food and fuel subsidies in its inaugural budget.

That is likely because a weak start to the annual monsoon season is likely to reduce harvests this year and drive food prices up further, which would make cutting subsidies even more difficult and a burden on the poor.

The targets for reducing the budget deficit could indicate the Modi government plans to generate revenue by selling shares in state-owned businesses, said Sumesh Sawhney of Jones Day, a law firm that works with investors in India.

"It's not a big-bang budget, but it is not a disaster either," he said.

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