India’s economic growth will slow marginally this year, but the government expressed optimism Wednesday that the country’s economy is performing well as it moved to create more jobs ahead of general elections next year.
Despite a global slump, India has estimated that its economy will grow at around 6.5% in 2023 compared to the 7% growth expected in the current financial year, which ends in March.
“The Indian economy is therefore on the right track, and despite a time of challenges, heading towards a bright future,” Finance Minister Nirmala Sitharaman said, presenting the country’s annual budget in parliament. “After a subdued period of the pandemic, private investments are growing again.”
Sitharaman said that the government will hugely ramp up capital spending by 33% to over $122 billion. The massive boost in spending on projects such as roads and railways aim to create jobs in a country that has been struggling with high unemployment rates.
As India holds elections in nine states this year and then heads into general elections next year, Prime Minister Narendra Modi is under pressure to address joblessness.
Modi rose to power in 2014 on the promise of creating millions of jobs, but while growth in India has bounced back since the COVID-19 pandemic, critics point out that the recovery has been uneven and vast sectors of the economy such as agriculture and small industries are still struggling with a slowdown.
But some economists said that spending on infrastructure alone would do little to boost employment. “Construction of highways and rail projects are highly automated now and the employment generation is very low,” economist Arun Kumar told VOA. “Modern infrastructure is not employment intensive.”
Sitharaman said the government’s focus is on ensuring “inclusive” growth and announced higher spending on several projects such as providing affordable housing to the urban poor and free grain for poor people.
The government also said it would lower income tax for middle-income earners, a measure aimed at winning the support of India’s huge middle class. India, which has set a goal of going carbon neutral by 2071, also committed more than $4 billion toward clean energy initiatives.
Some economists, who have been calling for more spending on rural welfare programs, expressed concern that the government has slashed spending on a rural jobs program that promises 100 days of work in a year to rural families and is seen as a crucial social buffer.
“Demand for this program has been going up in the last 2½ years because of reverse migration from cities to villages during the COVID-19 pandemic and it still remains high,” according to economist Santosh Mehrotra at New Delhi’s Jawaharlal Nehru University. “It is surprising that the funds for this have been reduced though demand has not fallen off from those still facing distress.”
The overall projections for India however remain upbeat with economists saying that if economic growth stays on track this year, it will remain the world’s fastest growing major economy for a second straight year.
The International Monetary Fund said on Tuesday while giving an update on the World Economic Outlook that together, China and India will account for half of global growth this year, while the United States, and the Euro-area combined will account for 10%.