Modi pledges $24 billion for jobs, financial aid for allies in Budget 2024

Prime Minister Narendra Modi pledged 2 trillion rupees ($23.9 billion) to boost jobs and improve education in India, increased spending to his new allies, while also targeting a smaller fiscal deficit for this year. The government will focus on employment, skilling, small businesses and the middle class in the fiscal year through March 2025, Finance Minister Nirmala Sitharaman said in her budget speech Tuesday. She announced a number of employment-linked incentives for businesses to help spur jobs.

The budget is the first under a new coalition government led by Modi after his party lost its majority in elections. Joblessness and the high cost of living despite India’s rapid economic growth emerged as key voter concerns.

The prime minister is seeking to shore up voter support and balance the demands of his coalition partners without blowing out the budget deficit. Curbing the deficit and government debt will be key to raising India’s credit ratings, which are currently at the lowest investment-grade level.

Sitharaman said the government will narrow the deficit to 4.9% of gross domestic product in the current financial year, lower than her February projection of 5.1%. She pledged to curb the deficit gradually over time.

“The fiscal consolidation path has served our economy very well and we aim to reach the deficit below 4.5% next year,” she said. “The government is committed to staying the course.”

A revenue windfall this year has boosted the government coffers, giving it ample resources to boost spending while keeping the fiscal deficit under control. The central bank paid the government a record $25 billion dividend, while tax revenues have surged on the back of a stronger economy.

The smaller deficit means the government will cut its borrowing for the year slightly to 14.01 trillion rupees this year. Yields on India’s 10-year bond dropped to its lowest level since April 2022 after the news, before revising their declines. Stocks edged slightly lower, while the rupee traded little changed.

Modi allocated 150 billion rupees in financial aid through multilateral agencies to one of his key allies, the Telugu Desam Party, which governs the southern state of Andhra Pradesh. A request for support from a second ally, which runs Bihar state, will be expedited, Sitharaman said.

Other key highlights of the minister’s speech:

• Capital expenditure in the fiscal year through March 2025 will reach 11.1 trillion rupees, unchanged from February’s forecast
• Government to allocate 2.66 trillion rupees for rural development
• Customs duty on gold will be cut to 6%
• Government to undertake comprehensive review of Income Tax Act