India budget to raise capital expenditure by 33%

India's government will raise its capital expenditure by 33% to 10 trillion rupees ($122.29 billion) in the next fiscal year, the finance minister said on Wednesday, as Prime Minister Narendra Modi tries to create jobs ahead of a general election.

Since taking office in 2014, Modi has ramped up capital spending including on roads and energy, while wooing investors through lower tax rates and labor reforms, and offering subsidies to poor households to clinch their political support.

"After a subdued period of the pandemic, private investments are growing again," Nirmala Sitharaman said in parliament, referring to the COVID-19 crisis. "The budget makes the need once again to ramp up the virtuous cycle of investment and job creation. Capital investment is being increased steeply for the third year in a row by 33% to 10 trillion rupees."

After she revealed the big jump, ruling-party lawmakers thumped their desks as the camera moved to Modi. A lack of enough jobs for young people in the country of 1.4 billion has been one of the biggest criticisms of the rule of Modi, who is still widely projected to win the general election due next year. Indian shares pared early gains, while bond yields moved higher.

The benchmark indexes, Nifty 50 and the S&P BSE Sensex gave up gains, while the benchmark 10-year yield rose on the higher capital spending plans. Sitharaman said the aim was to have strong public finances and a robust financial sector for the benefit of all sections of the country.

She also allocated 350 billion rupees for an energy transition, as Modi focuses on green hydrogen and other cleaner fuels to meet the country's climate goals. Sitharaman said that despite a global slowdown because of the pandemic and the Russia-Ukraine war, the Indian economy was "on the right track". She is expected to announce a plan to lower the government's fiscal deficit later in her speech.