By Anand Giridharadas and Amelia Gentleman/International Herald Tribune  

MUMBAI: Buoyed by a strong economy, India’s finance minister called on Wednesday for billions of dollars in investment in agriculture and education to spread the benefits of growth more evenly.

In an annual budget address, Finance Minister Palaniappan Chidambaram proposed billions of dollars in spending to buoy the ailing rural economy and to open access to quality education, a dearth of which has hindered India’s thriving outsourcing industry.

Answering calls for greater investment by Indian outsourcers and multinationals, like Microsoft, which have vast operations here, Chidambaram proposed to raise federal spending on education by 34 percent, to $7.3 billion, including a doubling of outlays on secondary education. He proposed to raise health care spending by 22 percent, to $3.4 billion, and to inject an extra $1.3 billion into Bharat Nirman, a New Deal- style effort to build rural infrastructure like roads and telephone lines.

“Education and health care are the prime imperatives as far as this budget is concerned,” Prime Minister Manmohan Singh said after the speech.

By focusing on the nation’s grinding poverty, the budget proposal suggested that the government, led by the Congress party, was already turning its eye toward the 2009 general election, said Kuldip Nayar, a veteran political commentator in Delhi. That emphasis appeared to come at the expense of some of the business-friendly measures that industry had hoped for.

A widely expected corporate tax cut was not included in the package, which included new taxes on dividend payments, office space rentals and the profits of information technology firms.

Infosys, the Indian software giant, immediately announced that its margins would fall by 1.5 percent under the proposed tax regime.

“The finance minister is making a simple statement: ‘I’m happy companies are making money, but give me more of that,'” Uday Kotak, the vice chairman and managing director of Kotak Mahindra Bank, one of India’s largest financial houses, said on a televised discussion by business leaders.

The benchmark Sensex index of the Bombay Stock Exchange, which had fallen about 300 points before the speech as part of the worldwide stock- market tumble, plunged an additional 240 points, closing at 12,938.09, down 4 percent from the start of trading.

Some investors and economists interpreted the emphasis on poverty as a signal that economic liberalization was sliding ever further down the priority list.

Ifzal Ali, the chief economist of the Asian Development Bank, in Manila, and one of Asia’s vocal champions of anti-poverty efforts, was nevertheless gloomy about what he said was the lack of measures to sustain high growth rates.

“A disappointing feature of the budget speech is the omission of reforms for labor markets, privatization, financial sector, foreign direct investment caps, etc., which are critically needed to improve the business and investment climate,” Ali said by e-mail after the speech. He added, “Have reforms gone into a deep slumber?”

Chidambaram used the speech to propose a multifront attack on inflation, which has crept above 6 percent in recent weeks. Declaring inflation to be a grave threat to the average Indian, the government has recently lifted short- term interest rates, tightened the money supply and curbed duties on essential commodities.

Read the full report: International Herald Tribune

Video coverage of the finance minister’s address to Parliament: Government of India Finance Ministry