India is set to invest $24 billion over the next five years to stimulate job creation and increase rural expenditures, according to Finance Minister Nirmala Sitharaman, who presented the 2024/25 budget on Tuesday. This announcement came after the recent election where the government faced setbacks.
Sitharaman also announced a reduction in import duties on gold and silver to 6%, which industry experts believe could enhance retail demand and reduce smuggling in India, the world's second-largest consumer of bullion. However, this could potentially increase India's trade deficit and negatively impact the struggling rupee.
The government's focus on job creation follows criticism over rural distress and a weak job market, which were cited as reasons for the BJP's loss of an absolute majority in the elections. To address this, the government plans to allocate 2.66 trillion rupees ($32 billion) for rural development and introduce new schemes in states led by key allies.
To boost employment, the government will provide incentives to companies, particularly in manufacturing, and launch programs aimed at enhancing skills and offering subsidized loans for higher education. Despite government claims of creating 20 million new jobs annually since 2017-18, private economists argue that much of this growth is attributed to self-employment and temporary farm work.
Additionally, the government will continue funding long-term infrastructure projects, allocating 11.11 trillion rupees, and providing 1.5 trillion rupees in long-term loans to states. Some of these loans will be contingent on achieving specific reform milestones in areas like land and labor.
In a move to appease its allies, the government will expedite loans from multilateral agencies for Bihar and Andhra Pradesh. The government also aims to reduce its fiscal deficit to 4.9% of GDP in 2024-25, down from 5.1% projected in the interim budget, and has slightly reduced its gross market borrowing to 14.01 trillion rupees.
