India focuses on job creation, rural areas in first budget after election

NEW DELHI — India struck a balance between greater spending on jobs and rural development while narrowing the fiscal deficit in its 2024-25 budget unveiled on Tuesday (July 22), after last month's election setback for the government.

Analysts blamed distress in rural areas and a weak job market for a poor poll showing that cost Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) its absolute majority, making it dependant on allies to form a government.

The government will spend US$24 billion (S$32.28 billion) on job-spurring efforts over the next five years and US$32 billion on rural development this year alone, Finance Minister Nirmala Sitharaman said while presenting the budget to parliament.

"The budget successfully engineered a fine balance between supporting job creation and skilling, rural development and agriculture, along with continued focus on infrastructure spending without compromising on fiscal consolidation," said Sakshi Gupta, principal economist at HDFC Bank.

Amid concerns of an overheating market, Sitharaman also raised taxes on equity investments and equity derivative trading, while giving lower-income consumers some tax relief.

The government plans to cut its fiscal deficit to 4.9 per cent of gross domestic product in 2024-25, below the 5.1 per cent figure in February's interim budget. It has reduced its gross market borrowing marginally to 14.01 trillion rupees (S$225 billion).

That comes as a large surplus of US$25 billion from the central bank this year has helped the government reduce the fiscal deficit while letting it spend more.

The budget's employment-boosting measures include incentives for companies, such as those in manufacturing, and programmes to improve skills and hand out cheaper