The Indian finance minister on Wednesday presented the government’s last full budget before the general election in 2024, with a focus on growth and job creation.
“The budget takes the lead, once again, to ramp up the virtuous cycle of investment and job creation,” said Nirmala Sitharaman as she announced that capital spending would be increased by 33 per cent to 10 trillion rupees ($122.19 billion) or 3.3 per cent of gross domestic product in the financial year beginning in April, highlighting infrastructure as a priority.
The increase in capital expenditure “will go a long way in building roads, ports, and airports, which is crucial for making India a reliable investment destination”, said Anand Rathi, the founder and chairman of Anand Rathi Group, a financial services company in Mumbai.
The budget pegged total expenditure to rise by 7.4 per cent to 45 trillion rupees. Its gross market borrowing is projected at 15.43 trillion rupees.
Among the announcements, 350 billion rupees of investment was earmarked for energy security, while agriculture credit was increased, and more money was extended to the country’s affordable housing scheme.
The budget’s changes to the personal income tax structure are “expected to raise disposable incomes for the middle class …. [and] give a moderate boost to domestic consumption”, said Suman Chowdhury, executive director and chief analytical officer at Acuite Ratings & Research.
While it takes elections into account as Prime Minister Narendra Modi seeks another term next year, the government is also trying to rein in its fiscal deficit in the budget after it spent billions of dollars during the Covid-19 pandemic on vaccines, food for the poor and discounted loans for small businesses.
Ms Sitharaman said she was committed to reducing the fiscal deficit to below 4.5 per cent by the financial year to the end of March 2026.
The deficit ballooned to 9.3 per cent during the financial year to the end of March 2021. But that is projected to have come down to 6.4 per cent in the current fiscal period, and the government is aiming to cut that to 5.9 per cent in the next financial year.
The budget comes at a time when US-based Hindenburg Research’s claims of financial irregularities by the Adani Group are rattling investors. During the budget speech, there were also brief chants of “Adani, Adani” from the opposition benches.
“In spite of the massive slowdown globally caused by Covid-19 and the war [in Ukraine], the Indian economy is on the right track,” Ms Sitharaman said during her budget speech.
