CORRECTED: India unveils 16% rise in annual public spending

India's finance minister proposed a 16 percent rise in public spending Thursday in his annual budget as he sought to balance demands for pre-election spending with alarm over the public deficit.

Finance Minister P. Chidambaram, presenting the eighth budget of his career, acknowleged that the Indian economy was in a "trough" and that he had been required to cut expenditure in the current financial year.

Thanks to a dose of austerity, he said the government had "retrieved some economic space" which would allow him to increase spending by 16 percent to 16.6 trillion rupees (31 billion dollars) in the 2013/14 year which begins on April 1.

The veteran minister in the Congress government has been attempting a course correction since being reappointed to the finance portfolio in mid-2012 when his leftist and widely criticised predecessor Pranab Mukherjee was elected president.

He has introduced a string of reforms -- opening India to wider foreign investment and cutting deficit-ballooning spending and subsidies -- to avert a damaging credit rating downgrade and boost corporate spending.

"I have been at pains to state over and over again that India at the present juncture does not have a choice between welcoming and spurning foreign investment," Chidambaram told parliament.

"Foreign investment is an imperative," he added.

India will go to the polls next year and Chidambaram regretted how the economy had slowed sharply during the current term of the government, largely due to falls in domestic confidence and slowing global growth.

"I acknowlege that the Indian economy is challenged, but I am absolutely convinced that with your cooperation, we will get out of the trough and get on to a high growth path," he said.

He satisifed party colleagues clamouring for a rise in spending by allocating large increases in funds for development in rural areas -- where Indian elections are won and lost -- as well as on health and education programmes.

Indian shares were up 0.35 percent or 67.7 points at 19,220.12 in the immediate aftermath of Chidambaram's announcement.