Modi 3.0 Budget To Focus On Employment And Supporting The Rural Sector: Report

Prime Minister Narendra Modi's new administration is set to present its first budget on July 23. According to a Reuters story, economists at Goldman Sachs predict a focus on the rural economy and job creation, without a major shift towards welfare spending.

Focus on Job Creation

Goldman Sachs anticipates the budget will emphasize labor-intensive manufacturing, credit for small enterprises, and boosting services exports. "We see an emphasis on job creation through labor-intensive manufacturing, credit for micro, small and medium enterprises, continued focus on services exports by expanding global capability centres, and a thrust on domestic food supply chain," said Santanu Sengupta, chief India economist at Goldman Sachs.

The government aims to maintain its fiscal deficit target of 5.1% of GDP for the financial year ending March 2025. Despite this, an overarching statement about long-term economic policy is expected.

Challenges in Employment

Modi's Bharatiya Janata Party returned to power with allies after failing to secure a majority in recent elections. Post-poll surveys indicated unemployment and inflation as major concerns among voters, especially outside urban areas.

Citi's chief India economist Samiran Chakraborty noted that even with a projected GDP growth of 7%, job creation might fall short. "Even 7% GDP growth might not be able to fulfill the job requirement over the next decade," he said. Growth close to 7% would generate 8-9 million jobs annually, but 11-12 million are needed.

Incentives for Manufacturing

Goldman expects fiscal incentives for sectors like toys, textiles, apparel manufacturing, and commercial aircraft manufacturing to boost labor-intensive industries. Citi also suggested extending the production linked incentive scheme with a focus on domestic value addition and explicit employment targets.

Two-thirds of manufacturing jobs are in low-skilled labor-intensive sectors. However, Citi did not specify if these announcements would be part of the budget.

Agricultural Infrastructure

Goldman also foresees a focus on agricultural infrastructure and incentives to increase domestic crop production. This is aimed at tackling high food inflation, which has been near 8% for several months.

The upcoming budget will likely address key economic challenges while aiming to create more jobs and support rural development. The government's approach will be closely watched by economists and citizens alike as it seeks to balance growth with fiscal responsibility.