India spends $75b on defence

Modi earmarks $56 billion for job creation in post-poll budget

NEW DELHI:

India's government assigned billions of dollars for job creation and regions run by key coalition partners in a budget aimed at cementing the coalition and winning back voters after Prime Minister Narendra Modi's election setback.

The government set aside 6,21,940 crore Indian rupees ($75 billion) for defence spending in the Union Budget 2024-25 – up from last year's outlay of 5.94 lakh crore Indian rupees ($72.6 billion) – finance minister Nirmala Sitharaman announced as she presented the Union Union Budget 2024 on Tuesday.

Tax changes unveiled in the budget included a higher levy on equity investments to allay concerns the market might be overheating and lower taxes for foreign companies to attract more investment. The $576 billion in total outlays included $32 billion for rural programmes, $24 billion to be spent over five years to create jobs, and more than $5 billion for two states ruled by coalition partners.

"In this budget, we particularly focus on employment, skilling, small businesses, and the middle class," Finance Minister Nirmala Sitharaman said on Tuesday. The government will also implement reforms across factors of production, including land and labour, she said.

Subsequent budgets would continue to focus on those areas, Sitharaman said while presenting her seventh annual budget. Despite the new spending, India cut its fiscal deficit target to 4.9% of gross domestic product in fiscal year ending on March 31, 2025, from 5.1% in February's interim budget, helped by a large surplus of $25 billion from the central bank.

The government also marginally reduced gross market borrowing to 14.01 trillion rupees. Economist had blamed the distress in rural areas and a weak job market for a poor poll showing that cost Modi's Bharatiya Janata Party (BJP) its absolute majority. They say land and labour reforms are essential for India to sustain strong economic growth. Asia's third-largest economy grew 8.2% in the past fiscal year and the government sees growth of 6.5% to 7% this fiscal year, a report showed on Monday.

India's reported urban unemployment rate is 6.7%, but private agency the Centre For Monitoring Indian Economy pegs it higher, at 8.4%. The budget also maintains spending on long-term infrastructure projects at 11.11 trillion rupees, with states assigned 1.5 trillion rupees in long-term loans to fund such expenditure. Some will be linked to reform milestones in areas such as land and labour, which Sitharaman said the government intended to push in its third term.