Indian Finance Minister Nirmala Sitharaman will leave the Ministry of Finance on July 23, 2024 to present the budget in the Parliament in New Delhi, India.
Bloomberg | Bloomberg | Getty Images
India's government on Tuesday pledged to spend on job creation but also called for fiscal prudence as it announced the budget – the first since national elections in June that led to the formation of a new coalition government.
India's finance ministry on Tuesday lowered the country's fiscal deficit target to 4.9% for the fiscal year ending in March 2025, a revision from 5.1% during the interim pre-election budget period announced in February.
India's Finance Minister Nirmala Sitharaman said in the announcement that the target will be reduced to 4.5% or lower by the fiscal year ending in March 2026.
Capital expenditure will be maintained at the February target of 11.11 trillion rupees ($133.9 billion), or 3.4% of GDP in fiscal 2025, to support India's ambition to enhance its physical and digital infrastructure to become a developed nation by 2047.
Vipul Bhowar, senior director of listed investments at Mumbai-based Waterfield Advisors, said the announcements demonstrate the government's “unwavering commitment to maintaining fiscal discipline to enhance the country's creditworthiness and ensure economic stability.”
Subscribe now
“This is critical to attracting foreign investment and sustaining growth,” he said, adding that “unprecedented fiscal support” from the central bank would make the fiscal deficit target possible.
infrastructure
Sitharaman also spoke broadly on Tuesday on the issue of further developing India's cities, particularly in Bihar and Andhra Pradesh, key alliance allies of Prime Minister Narendra Modi's Bharatiya Janata Party. area.
While the government will push for more financial support to boost infrastructure and accelerate agricultural projects in Andhra Pradesh, Bihar is likely to get a new airport, medical college and sports facilities.
“Over the years, the central government has invested heavily in building and improving infrastructure, which has had a strong multiplier effect on the economy,” Sitharaman said in her subsequent budget speech.
“We will work to maintain strong fiscal support for infrastructure over the next five years, in conjunction with other priorities and the need for fiscal consolidation.”
Sujan Hajra, chief economist and executive director of Anand Rathi Shares and Stock Brokers, told CNBC that India “is stepping up its efforts to become a global manufacturing hub, especially in areas such as consumer electronics, automobiles and components, renewable energy, pharmaceuticals and chemicals.” ”.
“The strategy includes improving ease of doing business and upgrading infrastructure,” Hajira said in making the announcement on Tuesday.
unemployment
Modi's new government also proposed spending 2 trillion rupees ($23.9 billion) on Tuesday to increase job opportunities and improve the quality of education and training in the country, as high unemployment remains a huge and thorny challenge for the new government.
Unemployment is seen as one of the biggest reasons why Modi's Bharatiya Janata Party failed to win an outright majority in the lower house of parliament during the June general election.
According to statistics, the country's unemployment rate rose sharply to 9.2% in June from 7% the previous month. center for monitoring indian economy. Sitharaman spoke in detail about how to attract fresh graduates into the labor market, promising to train two million young people within five years and providing one month's salary (not exceeding Rs 15,000) to employees entering the labor market for the first time.
The Ministry of Finance has also proposed a plan to build 1,000 training institutions within five years to provide internship opportunities for 10 million young people in Fortune 500 companies.
Elsewhere, the corporate tax rate for foreign companies will also be cut from 40% to 35%, the budget outlines. The government also plans to abolish the angel tax for new start-ups.
Indian nifty 50 and BSE testing Negative response to budget. As of the trading day, the two indexes fell 0.12% and 0.09% respectively. On the other hand, the Indian rupee rose 0.06% to 83.70 against the US dollar.
GDP forecast
India's economic adviser said on Monday that the economy is expected to grow between 6.5% and 7% in the fiscal year ending March 2025, lower than the Reserve Bank of India's forecast of 7.2%.
“We are not pessimistic and are in fact very optimistic about growth. But we are also mindful of the challenges” such as the impact of the monsoon season, financial risks and geopolitical challenges, chief economic adviser V Anantha Nageswaran warned at an upcoming press conference. Budget.
The chief economic adviser stressed that as China strives to become the world's third-largest economy, it does not have the luxury of “picking and choosing specific methods” to boost economic growth.
“No economic means will be excluded. We need manufacturing, we need services. We need agriculture, we need the public and private sectors to act together. We need unions and state governments to act together,” he said.
Correction: This story has been updated with the correct description of Bihar and Andhra Pradesh.