The Indian government has allocated billions of dollars for job creation and development in regions governed by key coalition partners in an effort to solidify the coalition and regain support from voters after Prime Minister Narendra Modi’s election setback. The budget includes tax changes such as higher levies on equity investments and lower taxes for foreign companies to stimulate investment.
Finance Minister Nirmala Sitharaman emphasized a focus on employment, skilling, small businesses, and the middle class in the budget. The government plans to implement reforms in land and labour to sustain economic growth. Despite increased spending, India reduced its fiscal deficit target, with the economy projected to grow between 6.5 to 7 percent this year.
While economists believe the budget strikes a balance between growth and fiscal discipline, implementing more ambitious reforms may be challenging for the coalition. Previous attempts at land and labour reforms have faced resistance. The budget includes measures to boost employment, such as incentives for training employees and cheaper loans for higher education.
India also plans to continue long-term infrastructure projects and allocate funds to states for reform-linked expenditures. The government has increased taxes on equity investments, but reduced corporate taxes for foreign companies to encourage investment. The changes initially caused a decline in shares and the rupee, but the market recovered. The tax adjustments are expected to stabilize the market and attract long-term investors. Additionally, lower taxes for lower-income consumers aim to boost consumer spending.
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