India’s US$576 billion budget bets on growth over populist politics

The budget unveiled on Tuesday struck a careful balance, promising vital financing for two key coalition states while adhering to a stringent programme to cut the fiscal deficit, a move that analysts say will ensure policy continuity.

Surprising observers, the budget pruned the deficit to 4.9 per cent from an earlier 5.1 per cent estimate for the year ending March 2025, aided by a US$25 billion surplus from the central bank. A high deficit can hamper economic growth, so this fiscal discipline was seen as a positive signal.

“This is a pretty growth-oriented budget,” said Sujan Hajra, group chief economist and executive director at Mumbai-based Anand Rathi Financial Services. “It has recognised the need for coalition governance and sought to dispel criticism about high youth unemployment and income gaps between the rich and the poor.”

The overall package totalled US$576 billion in outlays, including US$32 billion for rural programmes, US$24 billion over five years for job creation, and more than US$5 billion for the two coalition-ruled states.

Finance Minister Nirmala Sitharaman promised aid for Andhra Pradesh’s new state capital and infrastructure projects in eastern Bihar state, including roads and power stations.

Recognising the need to harness India’s vast young population, the budget unveiled a suite of employment-boosting measures. First-time private sector workers will receive a month’s wage, while employers will be partially reimbursed for contributing to the savings of older staff. The government also promised to build shelters for working women, aiming to encourage greater workforce participation.

Beyond direct incentives, the budget earmarked funds to upgrade industrial training institutes – a move meant to upskill