India’s budget focuses on roads, but critics see the need for more jobs.

NEW DELHI — India’s government unveiled its annual budget on Tuesday, which proposed a significant increase in spending on highways, roads and airports, but a smaller increase on rural development and jobs.

The $530 billion budget for the fiscal year starting April 1 presented by Prime Minister Narendra Modi’s government calls for major investment in infrastructure, but critics say it will do too little to address the pressing problems facing the country is facing. Among the most important: rising unemployment, falling household incomes and personal spending, and growing dissatisfaction with the economic inequalities that the pandemic has made more acute.

The coronavirus has hampered India’s economy, robbing it of the impetus needed to provide jobs for its young and rapidly growing workforce. It also aggravated longer-term problems that were already holding back growth, such as high debt, lack of competitiveness with other countries and policy missteps.

“You need to grow much faster on a sustained basis. That’s what we don’t have,” said Priyanka Kishore, head of India and Southeast Asia for Oxford Economics, a research firm.

People at all levels have seen an erosion of their real incomes, said Sunil Kumar Sinha, senior economist at India Ratings, a credit rating agency. “Income growth doesn’t even match the economy’s inflation rate,” he said.

As a result, many middle-class Indians have put off buying washing machines, big-screen TVs and kitchen appliances, goods they once splurged on during festival season. Demand is also slowing in poorer rural areas, experts say.

The government had estimated that India’s economy would grow by 11% for the year ending next month. It has now reduced that estimate to 9.2%. The estimate for the coming year is 8 to 8.5%.

The figures follow a sharp contraction of 7.3% in the year ending March 2021, when Mr Modi imposed a nationwide lockdown to curb the spread of the coronavirus. Hundreds of thousands of people lost their jobs and returned to their villages, trying to earn a living from meager agricultural plots.

The government’s ambitious vaccination program has helped restore some momentum, but Mr Modi’s reluctance to spend big has dampened growth, economists say.

The new budget foresees a 35% increase in spending, mainly for infrastructure projects. The government stressed that the emphasis on construction would help develop the economy.

“The approach is guided by seven drivers, namely roads, railways, airports, ports, public transport, waterways and logistics infrastructure,” said Nirmala Sitharaman, Minister of Finance of M Modi, during the presentation of the budget in Parliament. “The seven engines will drive the economy forward in unison.”

But the proposal is less generous on rural employment programs and failed to deliver what economists have long been calling for: an urban jobs plan to help day laborers in the country’s big cities.

Economists are particularly concerned about the slow pace of job creation, as millions of people are still out of work or have given up looking altogether.

Before the pandemic hit, India was lifting millions of people out of poverty. It took decades for the country to have an economy large enough to employ more than 400 million people, said Mahesh Vyas, chief executive of the Center for Monitoring Indian Economy. Today, the country has 187 million more people who need jobs, he said, a tall order in the current circumstances.

The deep scarring of the economy is particularly visible in employment and employment statistics. The center estimated that only 38% of the country’s working-age population had a job in 2020. By June 2021, the number had fallen to 34.6%, he said.

“It means people don’t have food on the table,” said Ms Kishore, of Oxford Economics. “People don’t even look because they’re so discouraged.”

Desperation has spilled onto the streets as Mr Modi and his party face a crucial test in national elections in the coming weeks.

Hundreds of candidates for railway jobs burned train carriages last week to protest what they said were unfair recruitment practices by the Modi government. More than 12 million people applied for 35,281 jobs.

“The protests over railway jobs reflect the frustration of young people that the government has moved far too slowly, almost hesitantly, to deliver the jobs it promised in 2019,” Vyas said.

Much of government spending will come from borrowing and taxes, including those on fuel and fertilizers, which have contributed to higher food and commodity prices. Another major concern of economists is the government’s attempts to rein in its deficits by cutting spending on welfare schemes and social protection.

They have long advocated for higher taxes on corporations and the country’s wealthy to allow the government to spend more in these areas, a demand that was not addressed in the budget.

The spending plan must be approved by parliament before taking effect in April.

Dr Sinha said the government’s focus on infrastructure spending could bring medium to long-term gains, but one of the most important elements missing from the budget was a comprehensive plan to bring back the consumption.

“The problem with this type of spending is that there will be a good gestation period,” he said. “But the challenge the economy is facing right now is that household sentiment, household income, everything is under pressure.”

“You have to do something to put money in your pockets,” he said.

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