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The federal government has announced measures to counter growth
The coalition government of the Indian Prime Minister Narendra Modi unveiled its first annual budget after its party lost a pure and simple majority in Parliament last year.
The Minister of Finance, Nirmala Sitharaman, announced measures to counter growth, prices increase and robbery consumption among the middle class in the third economy of Asia.
After a period of growth in the world of more than 8%, India is planned for its slower economic expansion in four years, because stagnant wages and high food prices have reached consumer spending and business profits.
Here are five key points to remember from the Union of India budget:
Tax reductions for the middle class
In a major relief for millions of taxpayers, the government has increased the limits of income tax exemption, which achieves up to 1.2 million rupees ($ 13,841; £ 11,165) – excluding Special rate income such as capital gains – fully booming.
The Minister of Finance also announced adjustments to other income tax slabs, which should leave more money in the hands of the middle class.
The concessions of income tax on the middle class “seems to be aimed at attacking the urban consumption crisis,” said India economist in Nomura, Aurodeep Nandi.
The impact, however, could be limited because a tiny fraction of the Indians poses direct taxes. In 2023, 1.6% of Indians (22.4 million people) in fact paid income taxes, according to data presented in Parliament.
The market has applauded ads with stocks of cars, consumer goods and online grocery companies.
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The government will continue to spend on infrastructure projects led by the State
Infrastructure expenses led by the State remain on the right track
Capital expenditure funded by the State on the main road, port and rail projects have been a key engine of the India growth engine since 2020.
Despite an unexpected contraction in actual expenses in the first nine months of this year, the government has slightly increased its infrastructure expenditure target for this year from 11.1 billions to 11.2 Billions of Rupes (129.18 billion dollars; 104.21 billion pounds sterling).
The government has also proposed to offer unanswered loans to the states to enable them to spend more on the development of infrastructure.
Boost for nuclear energy, insurance
The budget has set itself the aim of generating 100 GW of nuclear energy by 2047. As part of this plan, a nuclear energy mission was launched with a budget of 200 billion rupees (2.3 billion Dollars, 1.86 billion sterling pounds). The plan is to deploy five indigenous reactors by 2033 and modify the laws, such as the law on civil liability for nuclear damage, to achieve objectives and obtain greater participation in the private sector in the sector.
At the same time, foreign direct investment limits for the insurance sector increased from 74% to 100%.
“This will help the interest of foreign insurers invest in the growing Indian insurance market, where we are expecting strong growth in bonuses to increase profitability,” said Mohammed Alon Londe, main analyst at Moody’s Ratings.
Small -scale industries and regulatory reform in orientation
In order to relieve the climate to do business, which was a major concern among investors, a high -level committee was announced to undertake regulatory reforms in non -financial sectors and reduce the burden of compliance with companies. The panel will make recommendations within one year.
Small industries and micro-industries, which represent 35% of the manufacture of India and create millions of jobs, have also obtained a boost thanks to budgetary support of 1.5 Billion of rupees (17.31 billions of dollars;
The government has also raised grants related to production and reduces import rights for local manufacturing units in sectors such as textiles, mobile phones and electronics. This could promote private investments, which did not recover after the COVVI-19 pandemic.
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Small industries and micro-industries get a boost thanks to tax support
Balance tax mathematics
Even with slightly higher budgetary expenses for the creation of infrastructure, India had to continue a delicate balance between pushing economic growth and keeping its expenses in check.
The budget reiterated a commitment to reducing the government’s deficit, which is the gap between what it earns and spending, 4.4% by 2026, compared to 4.8% this year.
Global rating agencies closely look at these figures, with lower debt figures leading to potentially better investment ratings in the future and a reduction in loan costs for the country.
The recent slowdown in India has made the compromise of growth against budget prudence increasingly difficult.
A recent economic survey of the Ministry of Finance expects the growth of GDP to be slowed between 6.3 and 6.8% during the financial year ending in March 2026, in accordance with the forecasts of the Reserve Bank of India .
With the budget out of the table, the emphasis will be placed on the monetary policy of the Central Bank later this month.
RBI has maintained policy rates at 6.5% since February 2023, but should start reducing the cost of the loan, as growth and inflation have started to decrease.
Last week, the central bank announced its intention to inject $ 18 billion into the national banking system to facilitate a cash flow, a move considered by many to be a precursor to assess the decreases.
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