Finance Minister Nirmala Sitharaman said private investment was rising after the pandemic and the government should focus on driving growth.
Prime Minister Narendra Modi’s government presented to Parliament an annual budget of $550bn that calls for ramping up capital spending by 33 percent to spur economic growth and create jobs in advance of a general election next year.
Finance Minister Nirmala Sitharaman said on Wednesday private investment was rising after the coronavirus pandemic and the government should focus on driving growth.
India’s economy is projected to grow 7 percent in the fiscal year ending in March. The government forecasts growth of 6-6.5 percent next year, but it is struggling to generate enough jobs for its population of 1.4 billion people.
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“The budget makes the need once again to ramp up the virtuous cycle of investment and job creation,” Sitharaman said.
India’s economy surpassed that of the United Kingdom last year to become the world’s fifth-largest. Its population is expected to overtake China’s in size this year.
Despite steady economic growth, the Modi government has struggled to dismiss unemployment concerns and is under pressure to generate enough jobs, especially as it faces key state polls this year and a general election in 2024 that it is still expected to win.
According to the Center for Monitoring Indian Economy, the unemployment rate stood at 8.3 percent in December, up from 6.5 percent in January 2022.
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The government is aiming for a budget deficit of 5.9 percent of India’s gross domestic product (GDP) for the 2023-24 financial year, lower than the 6.4 percent for this fiscal year.
Despite worries the world economy is headed for a slump, the finance minister said she was confident the country’s future was bright. “India is on the right track.”
Free grains, affordable housing
Apart from raising capital spending on construction of schools, airports, heliports and other infrastructure to $122bn, the budget extended a $24bn scheme to provide free grain to vulnerable households for one year.
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The government will also increase by 66 percent its spending on providing affordable housing to the urban poor, Sitharaman said, and prioritise “green growth” with a $4.3bn investment towards helping India meet its goal of going carbon neutral by 2070.
The budget also announced new tax relief measures aimed at bringing some respite for India’s large middle class. But it slashed spending by 30 percent on India’s rural jobs programme, a boon for the country’s most vulnerable, triggering criticism from activists and the opposition.
On Wednesday, Modi praised the budget as laying a strong “foundation for the aspirations and resolutions of a developed India”, and said the government’s investment into infrastructure has increased by more than 400 percent since 2014 when he first became prime minister.
Opposition lawmakers chanted “Adani, Adani” at one point, prompting Sitharaman to pause. Political opponents have urged India’s market regulator to investigate India’s richest man, Gautam Adani, after a US-based short-seller issued a report last week accusing him and his company of stock market manipulation and accounting fraud.
The resulting sell-off of Adani-related shares wiped out tens of billions of dollars worth of market value for his business empire.
Critics of the 60-year-old billionaire have said his rise has been boosted by his apparently close ties to Modi.
The budget requires approval from both houses of Parliament, but it is bound to be enacted as Modi’s party holds a strong majority.