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India's new government, led by PM Narendra Modi on Thursday unveiled a first Budget that seeks to revive economic growth and curb borrowing, but left open questions on how it will reduce the fiscal deficit and restore investor confidence.
Expectations had been high that Prime Minister Narendra Modi would use India's strongest election mandate in 30 years to take radical steps comparable to the 1991 market reforms that unleashed an era of high economic growth.
After two weak years, the government announced steps to boost capital spending in Asia's third-largest economy and reassure foreign investors that they will get fair treatment.
Yet Finance Minister Arun Jaitley stopped short of halting retroactive tax claims against foreign investors. Britain's Vodafone said in response it will pursue its fight against a years-old $2.2 billion charge.
"We shall leave no stone unturned in creating a vibrant and strong India," Jaitley said, promising to raise the pace of economic growth to 7-8 percent in three to four years from less than 5 percent now.
Jaitley, 61, told lawmakers he would uphold the "daunting" fiscal deficit target for this year inherited from the last government - 4.1 percent of gross domestic product - but admitted that this would be a challenge.
"The intent appears to be there, but the measures have not been really thought through," Atsi Sheth, Moody's sovereign credit analyst for India, told Reuters.
Standard & Poor's, which has long warned India that it may lose its investment grade rating unless the government works harder to balance its finances, said the budget did not change its assessment.
"I have no authority to rate ratings agencies, but I'll only tell them to be a little more realistic," Jaitley said, in reference to criticism that his "cautious" budget did not do enough to reduce subsidies.
Jaitley announced an 8 percent rise in spending, roughly unchanged after taking inflation into account. The government will also seek to raise a record $10.5 billion from asset sales - four times what the previous government collected from privatisation moves in the fiscal year that ended in March 2014.
Among the asset sales would be some holdings in state-run banks, Jaitley said, but he added the government would keep majority ownership.
In his two-and-a-quarter hour address, Jaitley raised the minimum income level at which people start paying tax and hiked levies on cigarettes and soft drinks.
Jaitley announced he would raise ceilings on foreign investment in the defence and insurance sectors and