NEW DELHI – The Indian government on Tuesday released its annual budget, which proposes a substantial increase in spending on highways, roads and airports, but the increase is less for rural development and employment.
The $530 billion budget for the April 1 fiscal year launched by Prime Minister Narendra Modi’s government represents a major investment in infrastructure, but critics say it’s too little. to solve pressing problems facing the country. Among the big problems: rising unemployment, falling household income and personal spending, and growing discontent over economic inequality that the pandemic has caused more.
The coronavirus has plagued India’s economy, robbing India of the momentum it needs to provide jobs to its young and fast-growing workforce. It also went bad long term problem capital that has slowed growth, such as high debt, lack of competitiveness with other countries and policy mistakes.
“You have to grow much faster on a sustainable basis. That’s what we don’t have,” said Priyanka Kishore, head of India and Southeast Asia at research firm Oxford Economics.
Sunil Kumar Sinha, chief economist at India Ratings, a credit rating agency, said people have seen their real incomes erode. “Earnings growth has not even matched the rate of inflation in the economy,” he said.
As a result, many middle-class Indians have quit buying washing machines, big-screen TVs and kitchen appliances, items they used to roll out during the holiday season. According to experts, demand is also declining in poorer, rural areas.
The government has estimated that the Indian economy will grow 11% in the year ending March 2022. It has now revised down that estimate to 9.2%. Estimates for next year are 8 to 8.5 percent.
These numbers stem from a deep 7.3% decline in the year ending March 2021, when Mr. Modi imposed a nationwide lockdown to limit the spread of the coronavirus. Hundreds of thousands of people lost their jobs and returned to their villages, trying to make a living from the small plots of land.
Economists say the government’s ambitious vaccination program has helped provide some impetus, but Mr. Modi’s unwillingness to spend big has stunted growth.
The new budget calls for a 35% increase in spending, mainly on infrastructure-related projects. The government emphasized that focusing on construction will expand the economy.
“The approach is driven by seven engines, namely road, rail, airport, harbour, mass transit, waterway and logistics infrastructure. Nirmala Sitharaman, Mr. Modi’s Finance Minister, said while presenting the budget in Parliament.
But the proposal is less generous for rural employment programs, and does not offer what economists have long promoted: an urban jobs scheme to help low-income earners. daily wages in major cities of the country.
Economists are particularly concerned about the slow pace of job creation, as millions of people remain unemployed or have given up looking altogether.
Before the pandemic hit, India lifted millions out of poverty. Mahesh Vyas, executive director of the Center for Economic Monitoring of India, said the country has taken decades to have an economy large enough to employ more than 400 million people. The country now has 187 million more people in need of work, he said, a high number given the current circumstances.
The deep scar to the economy is especially evident in the employment and employment statistics. The Center estimates that only about 38 percent The country’s working-age population was actually employed in 2020. By June 2021, the number has dropped 34.6 percent, It says.
“That means people don’t have food on the table,” says Ms Kishore, of Oxford Economics. “People don’t even look because they’re so frustrated.”
Desperation flooded the streets just as Mr. Modi and his party faced a crucial test in the state elections in the coming weeks.
Last week, hundreds of candidates applied for railway jobs Burned train coach to protest against what they say are the Modi government’s unfair recruitment practices. More than 12 million people have applied for jobs for 35,281 people.
Mr Vyas said: “The rail jobs protests are a reflection of the frustration of young people that the government is moving too slowly, barely delivering the jobs it promised in 2019.
A large portion of government spending will be increased by debt and taxes, including fuel and fertilizer, which have contributed to rising prices of food and staples. Another major concern for economists is the government’s effort to control the deficit by reducing spending on social and welfare programs.
They have long argued for higher taxes on companies and the country’s rich to help the government spend more in such areas, an unresolved need in the budget.
The spending plan must be approved by Parliament before it comes into force in April.
Dr Sinha said that a government focus on infrastructure spending could be profitable in the medium to long term, but one of the most important elements the budget was missing was a comprehensive plan. for consumption.
“The problem with this kind of spending is that it takes a relative amount of time during pregnancy,” he says. “However, the challenge that the economy is facing right now is household sentiment, household income, everything is under pressure.”
“Something needs to be done to put the money in the pocket,” he said.
https://www.nytimes.com/2022/02/01/business/india-budget.html India’s budget is focused on roads, but critics say more jobs are needed.