Updated: 07/10/2014 14:22 | By Agence France-Presse

Indian budget targets fiscal deficit of 4.1%

India's Finance Minister Arun Jaitley set a fiscal deficit target for this year of 4.1 percent of GDP as he presented the new government's first budget, while promising cuts in the next few years.

Indian budget targets fiscal deficit of 4.1%

Indian Finance Minister Arun Jaitley (C) leaves his office to table the budget in parliament in New Delhi on July 10, 2014 - by Prakash Singh

He said India urgently needed "to introduce fiscal prudence" by raising the tax take of the government and making efforts to balance the books after years of overspending. 

"We cannot leave behind a legacy of debt for future generations," he said, setting a target for the deficit in the 2015/16 financial year of 3.6 percent of gross domestic product and 3.0 percent in 2016/17.

For the current financial year, which runs to March 31 next year, he said he would retain the 4.1 percent target of the previous left-leaning Congress party government which lost national elections in May.

"The target of 4.1 percent fiscal deficit is indeed daunting. Difficult as it may appear, I have decided to accept this target as a challenge," he told parliamentarians.

Shares have rocketed on expectations the new government of Narendra Modi will use the budget to flesh out campaign promises to lift Asia's number-three economy from its longest stretch of sub-five percent growth in a quarter-century.

Jaitley announced an increase in the permitted level of foreign direct investment in the defence and insurance sectors to 49 percent from 26 percent, and also said the government intended to sell an unspecified amount of shares in public banks.

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