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World

India hikes spending, shuns ‘outright populism’ in last pre-election budget

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  • Capex to rise 33% to 10 trillion rupees in 2023/24
  • Govt targets gross borrowing of 15.43 trillion rupees
  • Eyes fiscal deficit of 5.9% in 2023/24, 4.5% by 2025/26

NEW DELHI, Feb 1 (Reuters) – India announced on Wednesday one of its biggest ever increases in capital spending for the next fiscal year to create jobs but targeted a narrower fiscal deficit in its last full budget ahead of a parliamentary election due in 2024.

Prime Minister Narendra Modi’s party has been under pressure to create jobs in the populous country where many have struggled to find employment, although the economy is now one of the world’s fastest-growing.

“After a subdued period of the pandemic, private investments are growing again,” Finance Minister Nirmala Sitharaman said as she presented the 2023/24 budget in parliament.

“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.”

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The capital spending increase to about $122.3 billion, which would amount to 3.3% of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37% between 2020/21 and 2021/22.

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Total spending will rise 7.5% to 45.03 trillion rupees ($549.51 billion) in the next fiscal year starting on April 1.

Sitharaman said the government would target a fiscal deficit of 5.9% of GDP for 2023/24 compared with 6.4% for the current fiscal year and slightly lower than a Reuters poll of 6%. The aim is to lower the deficit to 4.5% by 2025/26.

Reuters Graphics

STEADY ‘MACRO BOAT’

Brokerage Nomura said the budget “prudently pushes for growth, without rocking the macro boat”.

“In the event, the government has presented a good budget. It has pushed for growth via public capex and continued on the path towards fiscal consolidation, without offering much in terms of outright populism.”

Capital Economics said the “absence of a fiscal blowout”, a recent drop in inflation and signs of moderating growth could convince India’s central bank to slow the pace of rate hikes next week.

It said there was still a chance of fiscal slippage as campaigning kicks off for the election, in which Modi is widely projected to win a third straight term.

The finance ministry’s annual Economic Survey, released on Tuesday, forecast the economy could grow 6% to 6.8% next fiscal year, down from 7% projected for the current year, while warning about the impact of cooling global demand on exports.

Sitharaman said India’s economy was “on the right track, and despite a time of challenges, heading towards a bright future”.

India’s real GDP is forecast to grow in the range of 6-6.8% in FY24

Her deficit plan will be aided by a 28% cut in subsidies on food, fertiliser and petroleum for the next fiscal year at 3.75 trillion rupees. The government cut spending on a key rural jobs guarantee programme to 600 billion rupees – the smallest in more than five years – from 894 billion rupees for this fiscal year.

Reuters Graphics

The government’s gross market borrowing is estimated to rise about 9% to 15.43 trillion rupees next fiscal year.

Reuters Graphics Reuters Graphics

CONSTRAINTS

Moody’s Investors Service said the narrower fiscal deficit projection pointed to the government’s commitment to longer-term fiscal sustainability, but that a “high debt burden and weak debt affordability remain key constraints that offset India’s fundamental strengths”.

Among other moves to stimulate consumption, the surcharge on annual income above 50 million rupees was cut to 25% from 37%.

Indian shares reversed earlier gains to close lower on Wednesday, led by a fall in insurance companies after the budget proposed to limit tax exemptions for insurance proceeds, while Adani Group shares tumbled again as it struggles to repel concerns raised by a U.S. short seller.

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

A lack of jobs for young people, and meagre wages for those who do find work, has been one of the main criticisms of Modi.

Sitharaman also said the government was allocating 350 billion rupees for energy transition, as Modi focuses on green hydrogen and other cleaner fuels to meet India’s climate goals.

($1 = 81.7725 Indian rupees)

Reporting by Shubham Batra, Nikunj Ohri, Shivangi Acharya, Sarita Singh, Nigam Prusty, Manoj Kumar, Rupam Jain and Indian bureaux; Writing by Krishna N. Das; Editing by Kim Coghill, Jacqueline Wong and Gareth Jones

Our Standards: The Thomson Reuters Trust Principles.

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World

Brazil election: ex-president Luiz Inácio Lula da Silva wins vote but not outright victory | Brazil

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Brazil’s acrimonious presidential race will go to a second round after the former president Luiz Inácio Lula da Silva failed to secure the overall majority he needed to avoid a run-off with the far-right incumbent Jair Bolsonaro.

With 98.1% of votes counted the leftist veteran had secured 48.04% of the vote, not enough to avoid the 30 October show down with his right-wing rival. Bolsonaro, who significantly out-performed pollsters’s predictions and will be buoyed by the result, received 43.54%.

Speaking on the eve of the election Lula said he was hopeful of a first round win but would redouble his efforts to reclaim power if a second round was needed.

“I feel great hope that this election will be decided tomorrow, but if it isn’t we’ll have to behave like a football team when a match goes to extra time. We’ll rest for 15 minutes and then we’ll get back out onto the pitch to score the goals we didn’t score in normal time,” he told reporters.

Gleisi Hoffmann, the president of Lula’s Workers’ party, told reporters the campaign was neither “sad or downcast” at the result and pointed to Lula’s more than 56 million votes.

“Congratulations president Lula for your victory,” she declared.

But the election result was a major blow to progresssive Brazilians who had been rooting for an emphatic victory over Bolsonaro, a former army captain who has repeatedly attacked the country’s democratic institutions and vandalized Brazil’s international reputation.

Bolsonaro is also accused of wreaking havoc on the environment and catastrophically mishandling a Covid epidemic that killed nearly 700,000 Brazilians, by undermining vaccination and containment efforts and peddling quack cures.

As she cast her vote for Lula on Sunday morning in São Paulo, restaurant host Gabriela Leoncio said of Bolsonaro’s administration: “It’s been a joke-slash-tragedy.”

Despite that, Bolsonaro confounded the forecasts of pollsters in several key states, including Rio de Janeiro and São Paulo.

Prominent Bolsonaristas were elected to Brazil’s congress and as state governors, including Bolsonaro’s former health minister, Eduardo Pazzuelo, who became a congressman for Rio, and his former environment minister Ricardo Salles.

Rio’s Bolsonaro-supporting governor Cláudio Castro was re-elected while one of Bolsonaro’s most controversial former ministers, the evangelical preacher Damares Alves, claimed a place in the senate.

Tarcísio de Freitas, Bolsonaro’s candidate for the governorship of São Paulo, also performed better than pollsters predicted and will face Lula ally Fernando Haddad in a second round.

“The far-right will be thrilled,” said the political scientist Christian Lynch.

Thiago Amparo, an academic and columnist for the Folha de São Paulo newspaper, said the right’s stronger-than-forecast showing showed Bolsonaro and Bolsonarismo were “alive and kicking”.

“There was a feeling among the left that Lula had a chance to win in the first round … the results show that it was wishful thinking to imagine the election would serve as a way to punish Bolsonaro for his disastrous policies during the pandemic.”

“I feel exhausted,” Amparo added. “But the results show we do not have the time to rest now. It is time to go out onto the streets… otherwise we are going to have a very dark future again.”

“I think Bolsonaro has the momentum,” said Thomas Traumann, a Rio de Janeiro-based political observer, although he believed Lula was still the favourite. “It’s a very disappointing night for the left.”

There was defiance from Lula and his allies as the right-wing successes and the need for a second round became clear.

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Sports

Blue Jays Outright A.J. Cole

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The Blue Jays announced this afternoon they’ve passed reliever A.J. Cole through waivers and assigned him outright to Triple-A Buffalo. Cole has previously been outrighted in his career, so he’ll have the right to elect free agency.

Cole logged 23 1/3 innings for the Jays last season, posting a 3.09 ERA but shakier peripherals. He was non-tendered over the winter but returned to the organization on a minor league deal. Selected to the big league roster in early May, Cole worked eight innings of one-run ball with seven strikeouts and just one walk. He landed on the 10-day injured list with neck tightness in early June, then suffered a left oblique strain that caused him to be shifted to the 60-day IL.

Nearing a return from those injuries, Cole began a minor league rehab assignment on August 11. Pitchers are allotted thirty days on rehab, and with Cole’s window dwindling, the Jays had to decide whether to bring him back. Rather than reinstall Cole to the active and 40-man rosters, Toronto elected to place him on waivers.

Cole has also appeared with the Nationals, Yankees and Indians over parts of seven big league seasons. Overall, the 29-year-old owns a 4.51 ERA/4.25 SIERA in 205 1/3 innings. Even if Cole accepts this outright assignment, he’d qualify for minor league free agency this winter if the Jays don’t add him back to the 40-man roster by the end of the season.

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