India's finance minister unveiled $576 billion in spending plans in the current fiscal year on Tuesday, marginally higher than interim budget estimates, aiming to boost manufacturing and jobs in the world's fastest growing major economy.
The government will spend 2.66 trillion rupees ($32 billion) on rural development, Finance Minister Nirmala Sitharaman said, while unveiling new programmes in the annual budget for states led by two key allies who shore up Prime Minister Narendra Modi's coalition government.
The budget spending estimate of 48.21 trillion rupees is 1.2% higher than the 47.66 trillion rupees estimate in the interim budget presented in February, helped by a bumper transfer of dividends from the central bank, while the fiscal deficit target was reduced to 4.9% of GDP.
The government will allocate 2 trillion rupees ($24 billion) for job creation over the next five years, Sitharaman said.
Modi's Hindu nationalist Bharatiya Janata Party (BJP) failed to secure an outright majority in the general election last month, making it dependent on fickle regional parties to form a government for the first time since he swept to power a decade ago.
Here are the highlights of the budget:
Economic Growth
* 2024/25 nominal GDP growth seen at 10.5% y/y vs 9.6% in 23/24
* Government to focus on infrastructure investments to promote private investments
* Global uncertainties pose a downward risk to short-term growth prospects
Fiscal Deficit
* 2024/25 fiscal deficit target lowered to 4.9% of GDP from 5.1% in February's interim budget
* To reduce fiscal deficit to below 4.5% by FY26
* Record surplus of 2.11 trillion rupees ($25.3 billion) from central bank helps narrow fiscal deficit
* Government's gross market borrowings for 24/25 cut by 120 billion rupees to 14.01 trillion rupees.
* Government's net market borrowing at 11.63 trillion rupees vs 11.75 trillion rupees in interim budget
Tax Changes
* Corporate tax rate for foreign companies cut to 35% from 40%, to attract investments
* Import tax on gold and silver reduced to 6% from 15%
* Tax rate raised for equity investments held for less than one year to 20% from 15% and for shares held for more than 12 months to 12.5% from 10%
* Import tax cut on mobile phones and some key parts from 20% to 15%
* To review import duties structure in next six months
JOB CREATION
* Budget proposes to allocate 2 trillion rupees for job creation over 5 years
* Allocates 1.52 trillion rupees for agriculture and allied sectors
* To launch 3 schemes for employment-linked incentives
Inflation
* Finance minister says inflation remains low, moving toward 4% target
* Proposes to take supply-side measures to contain food inflation
Infrastructure Investments
* Capex outlay for infrastructure retained at the interim budget target of 11.1 trillion rupees ($133 billion) or 3.4% of GDP
* Proposes 1.5 trillion rupees for long-term loans to states for infrastructure investments
Expenditure Plans
* Allocation for major subsidies including food, fertiliser estimated at 3.81 trillion rupees, 1.2% of GDP
* Spending on interest payment services estimated at 11.63 trillion rupees, 3.6% of GDP
* To allocate 150 billion rupees as special financial support through multilateral development agencies to Andhra Pradesh state, ruled by Modi's biggest ally TDP
* Credit support to small and medium businesses during the stress period
* Proposes to support setting up of 12 industrial parks
* Proposes to enhance small loans to 2 million rupees for small and medium businesses
* To set up a venture capital fund of 10 billion rupees for space
Rural Development
* Provision of 2.66 trillion rupees ($32 billion) for rural development
* Proposes state aid for 30 million affordable housing units in urban and rural areas
Urban Development
* Proposes 2.2 trillion rupees ($26 billion) federal government assistance for affordable urban housing over the next five years
* Government will partner with private players to develop small nuclear reactors
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