Narendra Modi’s government has promised to increase spending on railways, airports and other infrastructure to a record level and touted its economic achievements as it unveiled its final interim budget before parliamentary elections this year.
Finance minister Nirmala Sitharaman said in her budget address that New Delhi would spend Rs11.11tn ($134bn) in the coming fiscal year, an increase of about 11 per cent, which she said would “have a large multiplier impact on growth and investment”.
“The government’s efforts since 2014 have ensured for all citizens a better quality of life and life of dignity,” Sitharaman said, noting that per capita income has more than doubled during Modi’s decade in office as the Indian economy ascended from the world’s 10th largest to its fifth.
Sitharaman described India as a “bright star”, with economic growth this year estimated at 7 per cent. “This is the first budget in amrit kaal,” she said, a Sanskrit phrase meaning “time of nectar” that Modi has used to describe what he says is a period of unparalleled opportunities for the world’s most populous country.
Modi’s Hindu nationalist Bharatiya Janata party is widely expected to win a third five-year term in office in a lower house vote likely to be in April and May.
An alliance of opposition parties, including the formerly ruling Indian National Congress, is fraying because of internal squabbling over potential seat sharing and other issues.
Congress and other opposition parties will seek to attack the BJP for its economic record, including failing to create enough jobs for new workforce entrants despite India’s being one of the world’s fastest-growing big economies.
Modi remains popular among India’s poor in part owing to direct social transfers, including a scheme that provides free food grains to more than 800mn people, a pandemic-era programme that has been extended for five years.
The interim 2024-25 spending bill, which did not include any big new handouts, is expected to be superseded by a full budget after the new government takes office.
“The good thing is they didn’t announce any great populist schemes,” said Shumita Deveshwar, chief India economist with GlobalData TSLombard. “They feel the economy is doing quite well and are focusing on capex spend, which hopefully will have a positive impact on the broader economy.”
Sitharaman said New Delhi would continue to consolidate its finances and reduce the fiscal deficit to 5.1 per cent of GDP in the coming financial year, from 5.8 per cent in the current one. She said it would fall further to less than 4.5 per cent of GDP by 2025-26.
The budget also did not make any changes to tax rates. “It’s a fairly neutral budget which tries to do the most given the constraints of electoral prudence and fiscal prudence,” said Madan Sabnavis, chief economist with Bank of Baroda. “The higher allocation for capital expenditure has been managed by reining in other expenses.”
The Modi government’s Department of Economic Affairs this week released an upbeat review of the Indian economy that described the prime minister’s term as a “decade of transformative growth”. Modi has vowed to make India a developed economy by 2047, when it celebrates 100 years since independence from the UK.
“It seems they are quite confident they will be coming back for a third term,” said Deveshwar.