India Prime Minister Narendra Modi pledged 2 trillion rupees to boost jobs and improve education in India, and increased spending for new allies in his coalition government.

The government will focus on employment, skilling, small businesses and the middle class this year, Finance Minister Nirmala Sitharaman said in her budget speech Tuesday. She announced a number of employment-linked incentives for businesses to help spur jobs.

The budget is the first under a new coalition government led by Modi after his party lost its majority in elections. Joblessness and the high cost of living, despite India’s rapid economic growth, emerged as key voter concerns. 

Modi also allocated 150 billion rupees in financial aid through multilateral agencies to one of his key allies, the Telugu Desam Party, which governs the southern state of Andhra Pradesh. A request for support from a second ally, which runs Bihar state, will be expedited, Sitharaman said.

The prime minister needs to balance the demands of his coalition partners without blowing out the budget deficit. Curbing the deficit and government debt will be key to raising India’s credit ratings, which are currently at the lowest investment-grade level. 

The government has been steadily curbing the deficit after it surged to 9.2% of gross domestic product during the pandemic. In February, Sitharaman projected a shortfall of 5.1% for the fiscal year through March 2025 and pledged to lower it even further to 4.5% by March 2026.

Sitharaman has yet to announce a new deficit target in the budget speech. The NSE Nifty 50 index dipped as much as 0.5% before paring some losses.

  - Bloomberg