India’s Finance Minister Nirmala Sitharaman announced that the government will spend $24 billion over the next five years to boost job creation and rural spending. This decision comes after the recent election setback for the government, which was attributed to distress in rural areas and a weak job market. Sitharaman outlined plans to allocate 2.66 trillion rupees ($32 billion) for rural development and introduce new schemes for states led by key allies.
The government aims to stimulate employment by offering incentives to companies, particularly in manufacturing, and implementing programs to enhance skills. Additionally, subsidised loans for higher education will be provided. While the official urban unemployment rate in India stands at 6.7%, private agency the Centre For Monitoring Indian Economy estimates it to be higher, at 8.4%.
Government data revealed that 20 million new job opportunities have been created annually since fiscal 2017-18. However, economists believe that a significant portion of this figure comprises self-employment and temporary farm hiring. To support these initiatives, the government plans to maintain its spending on long-term infrastructure projects at 11.11 trillion rupees. It will offer long-term loans of 1.5 trillion rupees to states for funding such projects, with some loans being linked to milestones in reform areas such as land and labor.
In addition, the government will expedite loans from multilateral agencies for the states of Bihar and Andhra Pradesh, responding to requests from its allies. Furthermore, the government aims to reduce its fiscal deficit to 4.9% of the gross domestic product in 2024-25, lower than the 5.1% figure in the interim budget announced in February. Gross market borrowing has been slightly reduced to 14.01 trillion rupees.