India’s finance minister cut taxes for low income earners to spur consumption in Asia’s third-largest economy, while also targeting a slightly smaller budget deficit in the coming fiscal year, according to Bloomberg.

Individuals with income up to INR1.2 million ($13,854) will effectively be exempt from paying income tax, Finance Minister Nirmala Sitharaman said in her budget speech in New Delhi on Saturday. Previously, the cap was INR700,000.

The minister also announced other tax measures and reforms, which “will substantially reduce the taxes of the middle class and leave more money in their hands boosting household consumption, savings and investment.”

The tax changes will cost the government more than 1 trillion rupees in revenue, the minister said.

The government will narrow the budget deficit for the coming fiscal year starting April 1 to 4.4 per cent of gross domestic product, Sitharaman said, slightly below the 4.5 per cent previously estimated. The fiscal gap in the current year will also be slightly narrower at 4.8 per cent of GDP. The estimates were in line with economists’ projections.

“Our endeavour will be to keep the fiscal deficit each year such that the central government debt remains on a declining path as a percentage of the GDP,” she said.

The budget comes against the backdrop of India’s weakest economic growth since the pandemic and rising geopolitical risks, which have already prompted a selloff of about $600 billion in the nation’s stocks in the past month. Expectations had been high that Sitharaman would use the budget to announce consumption-boosting measures, such as income tax cuts and business incentives to spur growth.

The government expects the economy to expand 6.4 per cent in the current fiscal year and grow 6.3-6.8 per cent in the coming year — well below the 8.0 per cent annual growth needed for Prime Minister Narendra Modi to meet his ambitious economic goals of making India a developed nation by 2047.

Sitharaman began her speech in the parliament with loud protests from opposition lawmakers about different schemes announced by the minister. The main opposition Indian National Congress, which has almost doubled its seats in the lower house after last year’s election, has pushed for more debate in the parliament about issues such as joblessness and corruption allegations against billionaire Gautam Adani, who is perceived to have close ties to Modi.

The NSE Nifty 50 Index gave up initial gains and traded 0.4 per cent lower.

Other highlights from the budget speech: India plans a INR100 billion fund of funds for startups; the loan limit on farm credit card was raised to INR500,000; Sitharaman announced a new policy for labour-intensive sectors like leather and footwear. She also announced a scheme to make India a global hub for toy manufacturing; India will rely on atomic energy to meet its power needs of at least 100 gigawatt by 2047 and will amend nuclear liability regulations to allow for private sector investment; The Indian government plans to sell gross INR14.82 trillion ($171 billion) of bonds in the next fiscal year, slightly higher than the INR14.7 trillion economists had predicted.