The India budget unveiled a multi-billion-dollar effort aimed at creating new jobs and catering to key coalition partners, following a recent electoral setback for Prime Minister Narendra Modi’s government. This strategic move is intended to regain voter support and consolidate political backing.
Among the various fiscal measures introduced, the budget includes an increased tax on equity investments to address concerns about an overheated market. At the same time, it features reduced taxes for foreign companies, aiming to attract international investment.
The budget outlines significant expenditures, including $32 billion allocated for rural development programs and a commitment of $24 billion over the next five years to generate employment opportunities.
“In this budget, our primary focus is on employment, skill development, small businesses, and the middle class,” Sitharaman stated. She emphasized that future budgets will build upon these key areas of focus.
Despite these increased expenditures, India has managed to lower its fiscal deficit target to 4.9% of GDP for the 2024-25 fiscal year, down from 5.1% in February’s interim budget. The government has also slightly reduced gross market borrowing to 14.01 trillion rupees.
Analysts had previously pointed to distress in rural areas and a sluggish job market as contributing factors to the poor electoral performance that cost Modi’s Bharatiya Janata Party (BJP) its absolute majority.
“The India budget effectively balances job creation, skill development, rural advancement, and agricultural support, all while maintaining fiscal consolidation,” noted Sakshi Gupta, principal economist at HDFC Bank.
Furthermore, the government plans to implement reforms targeting various production factors, including land and labor. Sitharaman, presenting her seventh consecutive budget, assured that an economic policy framework would lay the groundwork for the next generation of reforms, aimed at creating job opportunities and sustaining high growth.