India budget 2017: Modi government to boost expenditure on infrastructure and rural schemes

India will be spending big in the 2017 financial year on infrastructure, rural development and towards alleviating poverty. Finance Minister Arun Jaitley made a series of announcements as he presented the Annual Financial Statement of the country on Wednesday (1 February).

The government is looking to spend a record $7.09bn (£5.69bn) on its rural job guarantee programme that will provide every rural household at least 100 days of work a year.

In his budget speech, Jaitley termed India a "bright spot" in the global economy and said that spending on rural development and the farm sector would increase by 24% as the government wants to double income from agriculture over the next five years.

This year's budget assumes significance as Prime Minister Narendra Modi had announced the demonetisation of high-value banknotes worth 86% of the country's cash on 8 November, 2016.

Terming the move as bold and decisive, Jaitley said the decline in economic activities following demonitisation was expected to have a transient effect on the economy. The announcement hit consumer demand, disrupted supply chains and hurt capital investments.

Meanwhile, for Indian taxpayers the finance minister announced a 50% cut in taxes levied on earnings between Rs 250,000 and Rs 500,000 (£2,945 to £5,888) a year.

For the year 2017/18, Jaitley said the federal fiscal deficit target would be 3.2% of GDP.

According to the Economic Survey, released ahead of the budget, India's economy is expected to grow by 6.5% in the year to March 2017, down from 7.6% in the previous financial year.