India's Finance Minister Nirmala Sitharaman as she leaves the Finance Ministry to present the annual budget in parliament in New Delhi on February 1, 2021. Photo: AFP/Sajjad Hussain

India unveiled a massive spending plan focused on healthcare and infrastructure on Monday, as the government sought to boost a coronavirus-ravaged economy on course for its biggest annual contraction on record.

The planned expenditure of US$30.6 billion on health and well-being schemes was more than double the equivalent outlay in the previous budget, although it included $4.8 billion for the country’s ambitious Covid-19 immunization drive, with plans to vaccinate 300 million by July.

The nation of 1.3 billion was badly hit by one of the world’s strictest virus lockdowns, with growth slumping by a historic 23.9% in April-June, and the economy expected to contract 7.7% in 2020-21.

“This budget provides every opportunity for our economy to raise and capture the pace that it needs for a sustainable growth,” Finance Minister Nirmala Sitharaman told parliament as she unveiled the annual budget.

The health sector has long suffered from chronic under-investment. As of 2017, the country had 0.8 doctors per 1,000 people, about the same level as Iraq, according to the World Bank.

Asia’s third-largest economy was in the throes of a slowdown even before the pandemic, during which it has recorded the second-highest number of coronavirus cases at 10.7 million.

Infrastructure was another big-ticket item, with some $76 billion – 34.5% more than in the previous budget – to be sunk into major projects, including roads and railways.

Divestments – including of national carrier Air India and part of the government’s stake in the country’s largest insurer, Life Insurance Corporation – would help to raise $24 billion, Sitharaman said.

But the sales of both state-run firms have been on the cards for some time, with the mooted IPO of the insurer sparking a walk-out by nearly 100,000 staff last year.

With lenders also struggling with a mountain of bad debt, Sitharaman said $2.74 billion would be put aside for the next financial year to recapitalize state banks.

Social security benefits, including minimum wages, will be extended to workers in the gig economy, which has flourished amid cheap mobile data and abundant labor.

The raft of spending measures will blow out the fiscal deficit to 9.5% of GDP for the financial year ending March, Sitharaman said, from a forecast 3.5%.

The government plans to borrow an additional $1.1. billion to fund the deficit, she added.

In its annual economic survey, the government said there would be a “V-shaped” recovery after the severe contraction, forecasting growth to hit 11% in the 2021-22 financial year.

AFP