Govt seeks to increase net spending by $5.2 billion for FY17

Finance Minister Arun Jaitley sought parliamentary approval on Wednesday to increase net spending by 351.7 billion rupees ($5.2 billion) in the current financial year that ends in March 2017.

The supplementary demand for more funds, the second to come before the Lok Sabha, had been expected for some months. In August, lawmakers had approved $3.1 billion in additional spending for the current financial year.

The request comes after the latest data showed a healthy 7.3 per cent expansion in the Indian economy over the September quarter was led by state spending, while investment and private consumption were weak.

Prime Minister Narendra Modi's government must also contend with the fallout from his dramatic decision a month ago to abolish high-value banknotes accounting for 86 per cent of the cash in circulation.

The bid to purge the economy of "black cash" — undeclared income and the proceeds of corruption or racketeering — has caused huge economic disruption, making government spending a key prop for Asia's third-largest economy.

The extra spending includes 40 billion rupees for a rural jobs programme, 31 billion rupees for the farm ministry and 11 billion rupees to cover a higher pensions bill, according to the request which is likely to be approved because the lower house has a large government majority.

The supplementary demand also sought parliamentary approval to cover the cost of repayment obligations under the so-called Market Stabilisation Scheme, a facility run by the Reserve Bank of India to absorb up to 6 trillion rupees that have flowed back into the banking system following the so-called demonetisation.

Jaitley, when he unveiled his annual budget in February, earmarked 19.78 trillion rupees ($291.4 billion) in total spending, up 11.6 per cent from the prior year. He will unveil his next budget at the beginning of February.