India: First budget after election focuses on job creation, rural areas

In a bid to address the challenges faced by rural areas and boost job creation, India’s Finance Minister Nirmala Sitharaman unveiled a budget that allocates $24 billion over the next five years for job-spurring initiatives.

The government aims to tackle the distress in rural areas and the weak job market, which were cited as factors contributing to the Bharatiya Janata Party’s (BJP) setback in the recent election. With the BJP no longer holding an absolute majority, the government is now reliant on allies to form a government.

To support rural development, the government plans to allocate 2.66 trillion rupees ($32 billion). Additionally, new schemes will be introduced for states led by key allies.

In order to stimulate employment, the government will provide incentives to companies, particularly those in the manufacturing sector. It will also implement programs to enhance skills and offer subsidized loans for higher education.

While the official urban unemployment rate is reported to be 6.7%, private agency the Centre for Monitoring Indian Economy estimates it to be higher at 8.4%.

The government will continue to prioritize long-term infrastructure projects, allocating 11.11 trillion rupees for this purpose. It will also provide long-term loans of 1.5 trillion rupees to states for funding infrastructure expenditure. Some of these loans will be linked to milestones achieved in areas such as land and labor reforms, which the government intends to pursue in its third term.

In a gesture towards its allies, the government has expedited loans from multilateral agencies for the states of Bihar and Andhra Pradesh. Furthermore, the budget aims to reduce the fiscal deficit to 4.9% of the gross domestic product in 2024-25, lower than the 5.1% figure in the interim budget released in February. The gross market borrowing has been slightly reduced to 14.01 trillion rupees.

Overall, the budget focuses on revitalizing rural areas, boosting job creation, and sustaining long-term infrastructure projects. It sets a goal of reducing the fiscal deficit and provides support to states through loans and funding from multilateral agencies.