As Asia’s third-largest economy attempts to pull off an equitable post-Covid recovery, Prime Minister Narendra Modi’s administration has increased infrastructure expenditure and extended loan guarantees to small firms.
The announcements came as part of Finance Minister Nirmala Sitharaman’s annual budget, which was presented in parliament on Tuesday amid poor demand, job losses, rising inflation, and a surge of Omicron cases.
The administration has been chastised for failing to address the issue of a “two-speed recovery” characterized by strong growth concentrated at the top of the pyramid and high levels of stress in the country’s huge informal economy.
Ms. Sitharaman’s reaction appears to be a massive spending plan that only slightly reduces the country’s massive fiscal imbalance, or the difference between what it makes and what it spends.
In comparison to the previous year, the government’s overall capital spending target increased by 35.4 percent. A master plan for expressways was announced, along with 25,000 kilometers (15,534 miles) of new roadways, 100 new freight facilities, and extra subsidies for solar panel manufacture.
No changes to income tax rates or slabs were revealed, and the stock market praised the lack of additional taxes on the rich and the tight focus on expenditure.
But, according to economist Shubhada Rao, the focus on boosting private spending, which accounts for 55 percent of the Indian GDP and is still below pre-pandemic levels, was “lower than expected.”
The lack of detailed ideas to solve India’s unemployment issue, which recently triggered rioting in the eastern state of Bihar, was also a source of dismay.
MNREGS, a massive rural initiative that promises 100 days of work to every rural household, has seen its funding cut.
“The most significant anticipation was for an urban version of the rural employment guarantee plan, which was not realized, which was disappointing,” said Mahesh Vyas, CEO of the Centre for Monitoring the Indian Economy.
Ms Sitharaman also cut spending on food and fertiliser subsidies, indicating that her government’s free food grain program may be phased out, according to experts.
The budget also looked to imply acceptance for cryptocurrency trading, but India has yet to pass legislation on the subject.
Ms. Sitharaman said that India’s central bank, the Reserve Bank of India, will launch a “digital rupee” this year, making it one of the first big countries to do so.
She also stated that revenue from virtual digital assets will be subject to a 30% tax in India.
“The introduction of a central bank digital currency will provide the digital economy a significant boost. It will also result in a more cost-effective and efficient currency management system “she continued.