In a move to address economic challenges and spur job creation, India’s Finance Minister Nirmala Sitharaman unveiled a comprehensive plan to spend $24 billion on job-spurring efforts over the next five years. This announcement came as part of the 2024/25 budget, following a recent election setback for the ruling government.
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Key Highlights from the 2024/25 Budget
- Rural Development Investment: The government will allocate 2.66 trillion rupees ($32 billion) to rural development. This includes new schemes tailored for states led by key allies.
- Job Creation Initiatives: To tackle unemployment, the budget includes incentives for companies, particularly in the manufacturing sector. Additionally, there are programs aimed at improving skills and providing subsidized loans for higher education.
- Urban Unemployment: Despite official figures placing urban unemployment at 6.7%, the Centre For Monitoring Indian Economy estimates it to be higher, at 8.4%. The government’s new measures aim to address these disparities and create sustainable employment opportunities.
- Long-term Infrastructure Projects: Continuing its commitment to infrastructure, the government will maintain spending at 11.11 trillion rupees. Long-term loans amounting to 1.5 trillion rupees will be offered to states, contingent on reform milestones in areas like land and labour.
Economic and Political Context
- Election Setback: The Bharatiya Janata Party (BJP) recently lost its absolute majority, becoming dependent on allies to form a government. Analysts have attributed this to distress in rural areas and a weak job market.
- Fiscal Policies: The government aims to cut the fiscal deficit to 4.9% of GDP in 2024-25, down from 5.1% in the interim budget. Gross market borrowing is also set to be marginally reduced to 14.01 trillion rupees.
Impact on Markets and Future Outlook
- Consumer Stocks: Following the budget announcement, India’s consumer stocks (.NIFTYFMCG) rose by 1.5% to a record high, indicating positive market reception.
- Allied States Support: In response to its political allies, the government will expedite loans from multilateral agencies for the states of Bihar and Andhra Pradesh.
- Continued Reforms: The government has reiterated its commitment to pushing reforms in its third term, particularly in land and labour sectors, to sustain long-term economic growth.
India’s comprehensive budget plan reflects a balanced approach towards addressing immediate economic challenges while laying the groundwork for sustainable growth. The emphasis on job creation, rural development, and infrastructure projects underscores the government’s strategy to foster economic resilience and stability.
