India unveiled a fire-fighting budget on Monday that seeks to win back support among rural voters for Prime Minister Narendra Modi’s government and sustain growth against a grim global backdrop – all without borrowing more.
Finance Minister Arun Jaitley’s third budget marked a strategic shift by addressing rural distress in a country of 1.3 billion, where two-fifths of families rely on farming and are reeling from two years of drought.
At the same time it hiked public investment in India’s woeful infrastructure by 22.5 percent, while taking further steps to revive corporate investment that Modi needs to create new jobs for India’s burgeoning workforce.
Here are the highlights of Jaitley’s budget for the fiscal year.
Highlights: 
FISCAL DEFICIT
* Fiscal deficit seen at 3.9 percent of GDP in 2015/16
* Fiscal deficit seen at 3.5 percent of GDP in 2016/17
* Planned expenditure seen at 5.5 trillion rupees in 2016/17
* Proposes to set up panel to review fiscal responsibility management act
RURAL ECONOMY
* Rural jobs programme allocated 385 billion rupees in 2016/17
* Farmer welfare budget to total 359.84 billion rupees
* Rural road development to get 190 billion rupees
* Target of agriculture credit at 9 trillion rupees
* Interest subvention towards farm loans at 150 billion rupees
* To set up dedicated irrigation fund worth 200 billion core initially
* Allocates 55 billion rupees for crop insurance programme for 2016/17
GROWTH
* Nominal GDP growth seen at 11 percent year-on-year in 2016/17
MONETARY POLICY
* Government along with central bank to set retail inflation target every 5 years
* Monetary Policy Committee to have 6 members, including 3 appointed by federal government
* Monetary Policy Committee to decide policy rates to achieve inflation target; decisions shall be binding on central bank
* RBI act is being amended for implementing monetary policy framework
BANKING REFORMS
* Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find resources for additional capital for banks if required
* To weigh cutting stake in state-run IDBI below 50 percent
POLICY REFORMS
* Proposes to raise foreign portfolio investment limit in state-run companies except banks to 49 percent from 24 percent currently
* Bankruptcy code for financial firms to be introduced in parliament in 2016/17
* To list general insurances companies on stock exchanges
* Companies Act 2013 to be amended to improve ease of doing business
MARKET REFORMS
* Investment basket of foreign portfolio investors in corporate bonds will also include unlisted debt securities, pass-through securities
* Proposes raising investment limit for foreign entities in local stock exchanges to 15 percent from 5 percent
* Government proposes developing an electronic platform for repo in corporate bonds in 2016/17
INFRASTRUCTURE
* Allocates 2.21 trillion rupees for infrastructure development for 2016/17, up 22.5 percent on last year
* Allocation for roads and highways development at 550 billion rupees
* Capital expenditure on roads and rail development at 2.18 trillion rupees
DISINVESTMENT
* Total stake sales in 2016/17 seen at 565 billion rupees
* To encourage central public enterprises to divest own assets for raising resources for new projects
* Strategic divestment seen at 205 billion rupees
TAXATION
* Net revenue gain of 196.1 billion rupees seen from taxes in 2016/17
* Will not resort to retrospective taxation in future; one time tax dispute resolution proposed for retrospective taxation
* To rationalise corporate tax for new manufacturing companies
* To implement general anti avoidance tax rule from April 1, 2017
* To levy 20 percent ad valorem duty on locally produced crude oil versus current 4,500 rupees per tonne
* Security transaction tax on options raised to 0.05 percent
* Proposes to levy infrastructure cess of 1-4 percent on certain models of cars
* Raises factory gate tax on various tobacco products by 10-15 percent
* Proposes limited compliance window on undeclared income of domestic tax payers; new dispute resolution scheme to resolve tax disputes
* Thirteen cesses levied by various ministries having revenue collection of less than 5 million to be abolished
* Proposes to raise excise duty on aviation turbine fuel to 14 percent from 8 percent
* Considers scrapping export duty on low-grade iron ore
* Increases import duty on aluminium products to 7.5 percent from 5 percent
* Redemption of sovereign gold bonds by individuals will be exempt from capital gains tax
* Forex appreciation gains at redemption on rupee-denominated bonds by non-residents will be exempt from capital gains tax
EXPENDITURE
* Allocates 2.49 trillion rupees for defence sector in 2016/17
BORROWING
* Gross market borrowing seen at 6 trillion rupees for 2016/17
* Net market borrowing seen at 4.25 trillion rupees for 2016/17
* Government to switch bonds worth 750 billion rupees in 2016/17
SUBSIDIES
* Total subsidy seen at 2.5 trillion rupees in 2016/17
* Food subsidy seen at 1.35 trillion rupees
* Petroleum subsidy estimated at 269.5 billion rupees
* Fertilser subsidy seen at 700 billion rupees
INVESTMENT
* 100 percent foreign direct investment to be allowed in food processing industry
* Promises further reforms in foreign direct investment policy in insurance, pension, asset recast companies
GOLD
* Jaitley makes no mention of revising gold import duty in budget speech
* India raises concessional countervailing duty on gold dore bars to 8.75 percent from 8 percent
MARKET REACTION
* India’s NSE share index closes down 0.6 percent
* India’s 10-year bond yield ends down 16 bps at 7.62 percent, after falling as much as 18 bps, the lowest since Jan. 22. as Jaitley keeps 2016/17 fiscal deficit target
* Several of India’s state-owned banks shares’ gain as investors hope for more cash, despite Jaitley announcing lower-than-expected capital infusion plans
* Indian rupee ended at 68.4250/68.4350, posting the biggest gains in a single day since Feb. 4.
* India gold futures jump 1.3 percent
MODI ON TWITTER
“#Budget2016 will ensure a qualitative transformation in our villages and in the lives of farmers, women and marginalised sections of society.”
“Our commitment to rural electrification, housing for all, job creation, education and healthcare for all are strongly reaffirmed in #Budget2016.”
FINANCE MINISTER’S COMMENTS
“We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden.
“The government has to prioritise its expenditure. We wish to enhance the expenditure in the farm and rural sector, the social sector and infrastructure and provide for the recapitalization of the banks.
“Different schools of thought have argued either in favour of fiscal consolidation and stability or for a less aggressive consolidation and for boosting growth. I have weighed the policy options and decided that prudence lies in adhering to the fiscal targets.
“We stand solidly behind these banks. Our public sector banks will be strong and competitive.”