Indian Prime Minister Narendra Modi’s government presented to Parliament on Wednesday an annual budget of $550 billion that calls for ramping up capital spending by 33 percent to spur economic growth and create jobs ahead of a general election next year.
Finance Minister Nirmala Sitharaman said private investment was rising after the 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 percent-6.5 percent next year.
The country’s population is expected to overtake China’s in size this year, and its economy last year surpassed that of the United Kingdom to become the world’s fifth largest.
But despite steady economic growth, the Modi government has struggled to quash 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, which it is favored to win.
“The budget makes the need once again to ramp up 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 percent in December, up from 6.5 percent in January 2022.
The government is aiming for a budget deficit of 5.9 percent of India’s gross domestic product for the 2023-24 financial year, lower than the 6.4 percent for this fiscal year.
Despite worries that the world economy is headed for a slump, the finance minister was confident the country’s future was bright. “India is on the right track,” she said.
Apart from raising capital the spending on construction of schools, airports, heliports and other infrastructure to $122 billion, the budget extended a $24 billion scheme to provide free grains to vulnerable households for one year.
The government will also increase by 66 percent it is spending on providing affordable housing to the urban poor, Sitharaman said, and prioritize “green growth” with a $4.3 billion investment toward 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 program, 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.
Sitharaman’s budget speech was briefly interrupted by opposition lawmakers chanting “Adani, Adani,” after a tussle between Indian billionaire Gautam Adani and a U.S.-based short-seller dominated headlines this week.
Political opponents have urged India’s market regulator to investigate Adani after the short-selling firm accused his conglomerate of stock market manipulation and accounting fraud. The allegations led investors to dump Adani-related shares, wiping out tens of billions of dollars worth of market value for his business empire.
Critics of the 60-year-old billionaire say his rise has been boosted by his apparent close ties to Modi. The Adani Group has denied the allegations.
The budget requires approval from both houses of Parliament, but it is bound to be enacted as Modi’s party holds a strong majority.