Modi’s government pledges spending on jobs but fiscal prudence
Nirmala Sitharaman, India’s finance minister, leaves the ministry to present the budget at the parliament in New Delhi, India, on July 23, 2024.
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India’s government on Tuesday promised spending on job creation but also called for fiscal prudence as it announced its financial budget — the first since nationwide elections finished in June which led to a new coalition government being formed.
India’s finance ministry on Tuesday lowered the country’s fiscal deficit target to 4.9% for the financial year ending March 2025, a revision from 5.1% during the pre-election interim budget published back in February.
That target will then fall to 4.5% or lower for the financial year ending March 2026, India’s Finance Minister Nirmala Sitharaman said during the announcements.
Capital expenditure will remain at February’s target at 11.11 trillion Indian rupees ($133.9 billion) — or 3.4% of GDP in fiscal year 2025 — backing India’s ambitions to enhance its physical and digital infrastructure to become a developed nation by 2047.
Vipul Bhowar, senior director of listed investments of Mumbai-based Waterfield Advisors, said the announcements suggested the government “is steadfast in its commitment to upholding fiscal discipline to enhance the country’s creditworthiness and ensure economic stability.”
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“This is imperative for attracting foreign investment and sustaining growth,” he said, adding that “unprecedented financial support” from the central bank will make the fiscal deficit target possible.
Infrastructure
Sitharaman on Tuesday also spoke extensively on further developing urban India — especially in Bihar and Andhra Pradesh — two states where key coalition allies of Prime Minister Narendra Modi’s Bharatiya Janata Party have strong support.
While the government will push for more financial support to boost infrastructure and speed up agriculture projects in Andhra Pradesh, Bihar could get new airports, medical colleges and sports facilities.
“Significant investment the central government has made over the years in building and improving infrastructure has had a strong multiplier effect on the economy,” Sitharaman said in her accompanying budget speech.
“We will endeavor to maintain strong fiscal support for infrastructure over the next five years, in conjunction with imperatives of other priorities and fiscal consolidation.”
Sujan Hajra, chief economist and executive director at Anand Rathi Shares and Stock Brokers told CNBC, that India is “intensifying efforts to become a global manufacturing hub, particularly in sectors such as consumer electronics, automobiles and components, renewable energy, pharmaceuticals, and chemicals.”
“This strategy includes enhancing the ease of doing business and upgrading infrastructure,” Hajra said Tuesday as the announcements were made.
Unemployment
With high unemployment remaining…
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