NEW DELHI (AP) – On Saturday, Indian Prime Minister Narendra Modi's administration presented an annual budget that aims to attract the salaried middle class with tax reductions while promoting economic growth through enhancements in agriculture and manufacturing sectors. Finance Minister Nirmala Sitharaman, during her budget speech, emphasized that the government is prioritizing private investment as a means to strengthen growth, increase funding for agriculture, and amplify the spending power of the Indian middle class.
Sitharaman declared, “The focus of the budget is taking everyone together on an inclusive path,” adding that the government aspires to achieve a fiscal deficit of 4.4% of India's gross domestic product (GDP) by the financial year 2025-26. The budget comes at a time when India's economy, the world's fifth-largest, is anticipated to experience its slowest growth in four years, primarily due to a sluggish manufacturing sector, ongoing food inflation, stagnant job growth, and lackluster urban consumption. A report from the country’s chief economic advisor, released shortly before the budget, forecasts growth rates between 6.3% and 6.8% for the next fiscal year.
Several significant measures were outlined in the budget, including income tax reforms aimed at benefitting the salaried middle class. Sitharaman announced an increase in the income tax threshold to $14,800 from $8,074 and mentioned that the government would unveil a new income tax bill in the coming week. “The new structure will substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings, and investment,” she stated.
Modi, currently in his third term as Prime Minister, faces pressure to address dissatisfaction among the middle class and to create more job opportunities to sustain economic growth. Economists have advised the government to implement individual tax cuts and job creation programs as a strategy to combat rising unemployment, which was recorded at 7.5% among youth in January, indicating the considerable challenge of job delivery in a nation of over 1.4 billion people.
The budget also includes initiatives to uplift the agriculture sector, with plans for a nationwide program targeting high-yield crops, specifically pulses and cotton. This initiative aims to assist at least 17 million farmers, increasing the limit for subsidized credit from $3,460 to $5,767. Additionally, the government plans to officially register gig workers, simplifying their access to healthcare. This would involve the issuance of identity cards and the establishment of a national registry to ensure their inclusion in welfare initiatives. The gig economy in India is projected to employ more than 23 million individuals by 2030, according to a government think tank, NITI Aayog.
In terms of investments, Sitharaman revealed the establishment of a new fund dedicated to startups, alongside increased funding to foster innovation in collaboration with the private sector. She noted that manufacturing presently comprises approximately 17% of India's economy, falling short of the targeted 25%. Furthermore, the government intends to boost tourism-led employment in various Indian states, enhancing infrastructure, and improving air connectivity to 120 new destinations over the next decade.
Additionally, Sitharaman introduced the Nuclear Energy Mission, which is aimed at facilitating India's transition toward clean energy, with an ambitious target of developing at least 100 gigawatts (GW) of nuclear power by 2047. These measures reflect the government's strategic direction to stimulate the economy, increase job opportunities, and support essential sectors while catering to the needs of the middle class.
