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Capex to rise 33% to 10 trillion rupees in 2023/24
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Govt targets gross borrowing of 15.43 trillion rupees
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Eyes fiscal deficit of 5.9% in 2023/24, 4.5% by 2025/26
(Updates with new graphic)
By Shubham Batra, Nikunj Ohri and Shivangi Acharya
NEW DELHI, Feb 1 (Reuters) - India announced on
Wednesday one of its biggest ever increases in capital spending
for the next fiscal year to create jobs but targeted a narrower
fiscal deficit in its last full budget ahead of a parliamentary
election due in 2024.
Prime Minister Narendra Modi's party has been under pressure
to create jobs in the populous country where many have struggled
to find employment, although the economy is now one of the
world's fastest-growing.
"After a subdued period of the pandemic, private investments
are growing again," Finance Minister Nirmala Sitharaman said as
she presented the 2023/24 budget in parliament.
"The budget makes the need once again to ramp up the
virtuous cycle of investment and job creation. Capital
investment is being increased steeply for the third year in a
row by 33% to 10 trillion rupees."
The capital spending increase to about $122.3 billion, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020/21 and 2021/22.
Total spending will rise 7.5% to 45.03 trillion rupees ($549.51 billion) in the next fiscal year starting on April 1. Sitharaman said the government would target a fiscal deficit of 5.9% of GDP for 2023/24 compared with 6.4% for the current fiscal year and slightly lower than a Reuters poll of 6%. The aim is to lower the deficit to 4.5% by 2025/26.
STEADY 'MACRO BOAT'
Brokerage Nomura said the budget "prudently pushes for
growth, without rocking the macro boat".
"In the event, the government has presented a good budget.
It has pushed for growth via public capex and continued on the
path towards fiscal consolidation, without offering much in
terms of outright populism."
Capital Economics said the "absence of a fiscal blowout", a
recent drop in inflation and signs of moderating growth could
convince India's central bank to slow the pace of rate hikes
next week.
It said there was still a chance of fiscal slippage as
campaigning kicks off for the election, in which Modi is widely
projected to win a third straight term.
The finance ministry's annual Economic Survey, released on
Tuesday, forecast the economy could grow 6% to 6.8% next fiscal
year, down from 7% projected for the current year, while warning
about the impact of cooling global demand on exports.
Sitharaman said India's economy was "on the right track, and
despite a time of challenges, heading towards a bright future".
Her deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal year at 3.75 trillion rupees. The government cut spending on a key rural jobs guarantee programme to 600 billion rupees - the smallest in more than five years - from 894 billion rupees for this fiscal year. The government's gross market borrowing is estimated to rise about 9% to 15.43 trillion rupees next fiscal year.
CONSTRAINTS
Moody's Investors Service said the narrower fiscal deficit
projection pointed to the government's commitment to longer-term
fiscal sustainability, but that a "high debt burden and weak
debt affordability remain key constraints that offset India's
fundamental strengths".
Among other moves to stimulate consumption, the surcharge on
annual income above 50 million rupees was cut to 25% from 37%.
Indian shares reversed earlier gains to close lower on
Wednesday, led by a fall in insurance companies after the budget
proposed to limit tax exemptions for insurance proceeds, while
Adani Group shares tumbled again as it struggles to repel
concerns raised by a U.S. short seller.
Since taking office in 2014, Modi has ramped up capital
spending including on roads and energy, while wooing investors
through lower tax rates and labour reforms, and offering
subsidies to poor households to clinch their political support.
A lack of jobs for young people, and meagre wages for those
who do find work, has been one of the main criticisms of Modi.
Sitharaman also said the government was allocating 350
billion rupees for energy transition, as Modi focuses on green
hydrogen and other cleaner fuels to meet India's climate goals.
($1 = 81.7725 Indian rupees)
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India real GDP growth forecast Budget highlights India's fiscal deficit India's capital expenditure to increase by 33% India budget cuts expenditure on major subsidies India's gross market borrowings Where the money will go? India to ramp up capital spending India's MNREGA budget ANALYSIS-India's post-COVID spending boom drives two-speed
economy Despite India's economic growth, few jobs and meagre pay for
urban youth ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Shubham Batra, Nikunj Ohri, Shivangi Acharya,
Sarita Singh, Nigam Prusty, Manoj Kumar, Rupam Jain and Indian
bureaux; Writing by Krishna N. Das; Editing by Kim Coghill,
Jacqueline Wong and Gareth Jones)
