India plans to invest $24 billion over the next five years to generate more job opportunities and increase spending in rural areas, according to the country’s Finance Minister Nirmala Sitharaman. Â
Sitharaman stated that the government is focused on driving growth through job creation, training, and support for small businesses. She noted that India’s inflation rate is stable and moving towards the government’s 4 percent target, while the economy grew at an impressive 8.2 percent in the last fiscal year.
“India’s economic growth continues to be the shining exception and will remain so in the years ahead,” the minister said.
Balancing fiscal prudence and voter expectations
Indian Prime Minister Narendra Modi’s first post-election budget aims to lay out an economic vision that balances fiscal prudence with the expectations of disgruntled voters and the demands of his coalition partners.
“This budget will decide the direction of our work for the next five years and this will lay the foundation of fulfilling our objective to make India a developed country by 2047,” Modi said on Monday.
Addressing wealth disparity, unemployment
The budget includes tax cuts for the middle class, relief for distressed rural areas, and additional funding for two key coalition partners – Andhra Pradesh’s Telugu Desam Party and Bihar’s Janata Dal (United).Â
The government will also work to address concerns over a surge in wealth disparity, as a report by the World Inequality Lab shows that wealth concentrated in the richest 1 percent of India’s population is at its highest in six decades, while youth unemployment stands at over 17 percent.
Positive reactions, economic forecasts
Reactions to the budget have been largely positive, with analysts praising the government’s focus on welfare spending, capital expenditure, and fiscal discipline. However, some have criticized the increase in capital gains tax and securities transaction tax as a dampener for capital markets.
Moreover, the government forecasts economic growth of between 6.5 percent and 7 percent for the current fiscal year, slightly below consensus estimates. But it has ample cover from the central bank, which transferred a $25-billion surplus in May to help finance tax cuts, rural aid, and coalition partners’ demands.
Infrastructure investment
The government also plans to spend 11 trillion rupees ($131.51 billion) on long-term infrastructure projects this year, as part of its strategy to push growth and generate jobs.
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