For India budget, tightrope walk between creating jobs and gov’t deficit
For India budget, tightrope walk between creating jobs and gov’t deficit
Growth is slowing but there is ‘no room for fiscal leniency’ if India is to meet fiscal deficit targets, economists say.
Author: Unknown
Published on: 31/01/2025 | 00:00:00
AI Summary:
Prema Salgaonkar lost her job at a nonprofit nearly a year ago and her son Amar lost his job selling mobile phones and data plans six months ago. With no retailers hiring, he eventually took up temporary work, travelling nights on transport trucks, helping drivers negotiate with police and other officials. India’s gross domestic product (GDP) growth fell to 5.4 percent for the quarter ending September 2024. Economists say weak consumer demand and low capital investment have been a drag on the economy. Demand for goods and services recovered to pre-pandemic levels only in certain areas. But demand for mass-consumption products, such as soaps, shampoos and biscuits had remained low and fell further in the past quarter. India’s private sector investment in building capacity has remained low despite tax rates being reduced in 2019 to 22 percent from 30 percent for businesses. Sinha says corporate spending would come only with the visibility of demand. This tightrope walk of encouraging demand without overspending has also gotten harder with the new administration in the United States. India cannot expect the US government to continue encouraging American companies in these sectors to ‘friendshore’ to India. Sinha says many such bottlenecks for investors are now in the hands of state governments. Salgaonkar says she has benefitted from a Maharashtra government scheme which gives cash handouts of 1,500 rupees ($17) a month to women. India’s construction sector, which is also its second-largest employer after agriculture, could also get a boost in the budget, says Motilal Oswal’s Gupta. The government needs to also improve access to labour, land, capital to boost production which in turn will help create jobs. Sitharaman expects growth to recover in the next quarter. Inflation surged to 6.2 percent in October. Salgaonkar talks about rising prices of wheat, cooking gas and clothes.
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