The pulse | Economy | South Asia
While the budget provides a breather for the middle class through tax relief measures, the 30 per cent cut in spending on rural jobs programs will hurt India’s village poor.
Indian Prime Minister Narendra Modi’s government submitted to parliament on Wednesday a $550 billion annual budget that calls for increasing capital spending by 33 percent to boost economic growth and create jobs ahead of next year’s general election.
Finance Minister Nirmala Sitharaman said private investment was rising after the pandemic and the government should focus on boosting growth.
India’s economy is projected to grow 7 percent in the fiscal year ending in March. The government forecasts growth of 6 to 6.5 percent next year.
The country’s population is expected to outsize China’s this year, and its economy overtook Britain’s last year to become the world’s fifth-biggest.
But despite steady economic growth, the Modi government has struggled to quell concerns about unemployment and is under pressure to generate enough jobs, especially as it faces key state polls this year and a 2024 general election, which is favorite to win.
“The budget raises the need once again to accelerate the virtuous cycle of investment and job creation,” Sitharaman said.
According to the Center for Monitoring Indian Economy, the unemployment rate stood at 8.3% in December, up from 6.5% in January 2022.
The government is targeting a budget deficit of 5.9 percent of India’s gross domestic product for the 2023-24 fiscal year, down from 6.4 percent for this fiscal year.
Despite concerns that the world economy is heading towards a recession, the finance minister was confident that the country’s future is bright. “India is on the right track,” he said.
In addition to increasing capital spending on building schools, airports, heliports and other infrastructure to $122 billion, the budget expanded a $24 billion scheme to provide free grain to vulnerable households for one year.
The government will also increase by 66 percent what it spends on providing affordable housing for the urban poor, Sitharaman said, and will prioritize “green growth” with an investment of $4.3 billion to help India meet its goal of neutralizing pollution. carbon emissions by 2070.
The budget also announced new tax relief measures aimed at providing a breather for India’s large middle class. But it cut spending by 30 percent on India’s rural jobs program, a boon for the country’s most vulnerable, drawing criticism from activists and the opposition.
On Wednesday, Modi praised the budget for laying a “solid foundation for the aspirations and resolutions of a developed India” and said that government investment in infrastructure has risen by more than 400 percent since 2014, when he became prime minister.
Sitharaman’s budget speech was briefly interrupted by opposition lawmakers chanting “Adani, Adani” after a fight between Indian billionaire Gautam Adani and an American short seller dominated headlines this week.
Political opponents have urged India’s stock market regulator to investigate Adani after the short selling firm accused his conglomerate of stock market manipulation and accounting fraud. The allegations prompted investors to dump Adani-related shares, wiping tens of billions of dollars off the market value of his business empire.
Critics of the 60-year-old billionaire say his rise has been fueled by his apparent close ties to Modi. The Adani Group has denied the allegations.
The budget requires the approval of both houses of Parliament, but is bound to be enacted as Modi’s party has a large majority.