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India keeps infrastructure spend target unchanged at record 11.11 trln rupees for 2024-25
Infrastructure spending, which generates demand across sectors from cement to steel and creates jobs, has a strong multiplier effect on the economy, economists say.
FILE PHOTO: A drone view shows a bowstring arch bridge, installed by Hindustan Construction Company, that will connect the Bandra-Worli sea link and the coastal road in Mumbai, India, April 26, 2024. / REUTERS/Francis Mascarenhas
MUMBAI (Reuters) -India's federal government said on July 23 that it will spend a record 11.11 trillion INR ($132.85 billion) on infrastructure in the financial year ending March 2025 to support growth and create more jobs in the world's most populous country.
The spending plan was unchanged from the interim budget presented in February before the national elections.
"This would be 3.4 percent of our GDP (gross domestic product)," Finance Minister Nirmala Sitharaman said while presenting the federal budget.
GRAPHIC
For the current fiscal, the government has made an outlay of 1.5 trillion rupees for long-term loans to states for infrastructure.
WHY IT'S IMPORTANT
The government has doubled spending on infrastructure over the past three years as a way to boost the economy. As a percentage of GDP, longer-term capital expenditure has risen to 3.4 percent in the current year from 1.7 percent in 2019-20.
Infrastructure spending, which generates demand across sectors from cement to steel and creates jobs, has a strong multiplier effect on the economy, economists say.
India's economy expanded at a faster-than-expected pace of 7.8 percent in the March quarter, but Prime Minister Narendra Modi has faced criticism from analysts and political rivals for not creating enough jobs. This, in turn, has weighed on consumption, which forms 60% of India's GDP, and held back private investment.
MARKET REACTION
No change in the allocation for capital spending led to a 1.4percent fall in the stocks of capital goods companies, with Larsen & Toubro down 4 percent and Siemens down 2.7 percent.
($1 = 83.6310 Indian rupees)
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