India pledges infrastructure spending to help economy 'fly'

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 1.2 billion people. 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 pledged to complete 100,000 kilometres of roads currently under construction, build another 100,000 kilometres and commission five "ultra mega" power projects to help end electricity shortages. The government will set up tax-free infrastructure bonds to finance its plans through a national fund that will receive a 200-billion-rupee ($3.2 billion) injection of public money. Jaitley also announced plans for a universal social security system that would give poor Indians access to subsidised insurance and pensions. A new insurance scheme will provide coverage for accidents and death for just 12 rupees -- less than 20 US cents -- a year for India's poorest. The government also plans to set up a basic pension scheme for the millions of Indians currently unable to afford to put money aside for their old age, Jaitley said. - Focus on poverty - Despite new figures showing the economy is growing at a faster clip than previously thought, many ordinary Indians have yet to feel the benefit. Modi's Bharatiya Janata Party (BJP) last month suffered a drubbing in Delhi state elections, its first major defeat at the polls since it stormed to power, with critics saying Indians were tired of waiting for change. Jayshree Sengupta, senior fellow at the Observer Research Foundation, said the budget was surprisingly focused on poverty. "I was thinking that this budget would be very pro-industry, pro-corporate sector. But very surprisingly, the budget has a lot for the common person in India," she said. "It has gone into schemes which will actually bring about a welfare system for all, especially the poor." Jaitley announced plans to cut the corporate tax rate from 30 to 25 percent over the next four years and replace a wealth tax with a two-percent levy on the super rich. He said India had been "losing on both counts" because it was perceived by investors as a high tax economy, but realisation was very low due to the high number of exemptions. Analysts broadly welcomed the moves, but said the budget was light on the big bang reforms that many had hoped to see. "We all knew in our hearts that in a big democracy like ours (such) moves are most unlikely," said Alok Churiwala, head of Churiwala Securities in Mumbai. 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. - 'Funding the unfunded' - Jailey signalled defence spending would rise to 2.47 trillion Indian rupees ($40.07 billion), up from 2.29 trillion rupees in the current year, as India seeks to counter regional rival China. The government has forecast that growth for 2014/15 will reach 7.4 percent, making it the world's fastest growing major economy. India's economy has been seen as stagnating in recent years and the dramatic turnaround is due partly to a change in the way GDP data is calculated. But economists say low oil prices and reduced inflation have given India a genuine growth boost. India's government heavily subsidises food and fuel and there had been speculation Jaitley would seek to slash the multi-billion dollar subsidy bill. Instead, he pledged to make the schemes more efficient and reduce corruption by accelerating the roll-out of biometric cards and expanding direct cash transfers. He also said he would make it easier for small businesses to obtain credit through microfinance institutions. "Just as we are banking the unbanked, we are also funding the unfunded," he said. The Bombay Stock Exchange, which is usually closed on a Saturday but remained open for the budget, was down slightly as the lack of major reforms hit investor sentiment. It fell 0.43 percent, or 126.38 points, to 29,093.74 points.