The United Progressive Alliance, the ruling coalition of the Government of India has announced the annual budget.

The budget, which outlines government spending priorities from 2008 to 2009, has sparked a heated debate in India. Analysts have raised concerns over the increase in the overall government spending, particularly for high provisions of social expenditure and the debt relief programme for small farmers, which accounts for US$ 15 billion, or 1.3 percent of GDP.

Meanwhile, others claim that the increased spending in the social sector is simply a populist strategy to attract voters in the next national elections in May 2009. Furthermore, the government's cornerstone policy of containing the fiscal deficit is contingent on expanded revenues resulting from a projected growth of 8.8 percent for the fiscal year. However, unstable financial markets and high commodity prices could possibly undermine these projections and pose challenges to the government's fiscal position.

In the 11th Five Year Plan, India's national development agenda, the government has set public spending targets on education and health to reach 6 per cent and 3 per cent of GDP, respectively.But in order to do so, the government would need to raise the budget allocation for the health sector by at least 30 per cent annually, given an inflation rate of 4 per cent and overall annual GDP growth of 9 per cent. In this regard, social activists and civil society have criticized that expenditure increases of 20 per cent for education and 15 per cent for the health sector in the 2008-2009 budget are not sufficient to fulfil the government's commitment to meet these targets and, hence, the Millennium Development Goals.

At present, government health spending, at approximately 0.99 per cent of GDP, lags behind other developing countries in the region such as Bangladesh and Indonesia. Furthermore, civil society organisations argue that the budget provisions for education do not reinforce universal primary schooling. Rather, the proposed education initiatives, such as the 6,000 model schools, will likely benefit the more privileged groups in the Indian society. Meanwhile, the scheduled castes and tribes, including religious and ethnic minorities, are still marginalised and will not receive an adequate share of the government budget in the 2008-2009 fiscal year.