NEW DELHI (AP) — Indian Prime Minister Narendra Modi’s new government has presented an annual budget to parliament that will boost spending to create more jobs and boost economic growth while satisfying the coalition partners it needs to stay in power.
In her budget speech on Tuesday, Finance Minister Nirmala Sitharaman said the government is focused on boosting domestic growth through jobs, education and small businesses.
India’s inflation is stable and moving towards the government’s target of 4%, she said, as the economy grew by a staggering 8.2% last fiscal year.
“India’s economic growth remains an exception and will continue to be so in the years to come,” Sitharaman said.
More than a decade after he first became prime minister, Modi is under pressure to create more jobs to sustain growth.
The proposed budget includes a $24 billion package to create jobs over the next five years and increases spending on loans for small and medium-sized businesses. It allocates $18 billion to support agriculture and agricultural technology, such as climate-resilient seed varieties.
It would also increase spending, to $133 billion, on building 30 million homes for the poor, schools, airports, highways and other infrastructure. The budget would cut taxes on big business and allocate more money to two states, Andhra Pradesh and Bihar, that are governed by the Modi government’s main coalition partners.
The government plans to build new airports, medical colleges and sports and tourism facilities in the eastern Indian state of Bihar, which is ruled by the Janata Dal (United) party.
Sitharaman also announced special financial support for the south Indian state of Andhra Pradesh, which is ruled by the Telugu Desam Party.
Modi’s ruling Bharatiya Janata Party is counting on these two regional parties to keep the coalition government in power after it failed to win a majority on its own in recent national elections.
Modi said the budget will lead India to “better growth and a bright future”.
“Today’s Budget will act as a catalyst to make India the third largest economy in the world,” he said in a speech, reiterating his pledge to make India one of the three largest economies during his third term.
India’s economy, the world’s fifth-largest, is expected to grow at an annual pace of 6.5% to 7% in the fiscal year ending March 2025. But experts say the benefits of the rapid grow are unequally distributed, as the wealth of already prosperous Indians has steadily increased without actually reaching the majority of Indians who work in the country’s large informal sector. The quality of jobs there is poor and insecure.
Billions of dollars in subsidies for manufacturing have failed to create enough jobs. To reduce rising unemployment, the government said it would provide 12 months of paid internship opportunities to 10 million youngsters in India’s top 500 companies for a period of five years. Sitharaman said the training costs would be borne by the companies.
According to the Centre for Monitoring the Indian Economy, youth unemployment stood at 9.2% in early July, underscoring the challenge of creating jobs in the world’s most populous country, where millions of people graduate each year.
Inequality in India has increased dramatically over the past decade. According to a report by World Inequality Lab, wealth concentration in the richest 1% of India’s population is at its highest level in six decades.
The government is targeting a fiscal deficit of 4.9% of India’s gross domestic product for the 2024-25 fiscal year, down from 5.1% in the February short-term budget, Sitharaman said.
India is one of the largest current sources of emissions that lead to global warming, but the government on Tuesday announced plans to set up a new 800-megawatt coal-fired thermal power plant. Sitharaman said the government will also support the development of small and modular nuclear reactors to help meet India’s future energy demand.
The budget also sets aside $1.37 billion to address flood damage. India, one of the countries most vulnerable to climate impacts, has suffered a increase in flooding due to the extreme rainfall and melting of the glaciers in recent years.
The budget must be approved by both houses of parliament but is likely to be passed as Modi’s coalition government has a majority.
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Associated Press editor Sibi Arasu contributed to this report.
