Following electoral defeats for the Prime Minister's party, India intends to boost state subsidies for rural housing in the next budget by as much as 50%, to over $6.5 billion, according to two government sources. The government's proposal to increase expenditure on rural infrastructure, such as village roads, and a jobs program to assist millions of youth trapped in the farm sector due to a lack of manufacturing employment includes an increase in housing subsidies.
If authorized, it would represent the biggest yearly rise in government funding for the rural housing initiative since the program's launch in 2016. One of the government sources with knowledge of budget deliberations stated, "The government is worried over widespread rural economic distress, driven by higher food inflation and sluggish growth in farmers' incomes."
For the first time in ten years, Prime Minister Narendra Modi's BJP is depending on partners to form the government, after the opposition performed far better than anticipated in a fiercely contested national election that concluded last month.
After helping to finance the building of more than 26 million dwellings for low-income households during the previous eight years, the government now plans to enable the construction of an additional 20 million homes under the PM Awas Yojna (Rural) housing project. Details of the strategy should be revealed by Finance Minister Nirmala Sitharaman later this month during the budget presentation.
The second government source stated, "We anticipate a significant increase in allocations for several rural schemes this year, including housing, roads, and jobs program," adding that federal subsidies for rural housing may surpass Rs 550 billion ($6.58 billion), up from Rs 320 billion in the previous fiscal year.
He stated that the government may ask parliament for permission for this additional expenditure later, rather than as part of the budget, but that state spending on the rural employment program was anticipated to rise significantly from an earlier estimate of 860 billion rupees.
He stated that in addition, a different plan to increase village road investment from previous projections of 120 billion rupees in the current budget year was being considered. Given that they were not authorized to discuss budget suggestions with the media, both sources spoke on the condition of anonymity.
Economists and business executives begged the government to increase rural expenditure during pre-budget discussions, pointing out that private consumption was expanding at a rate of less than half the yearly growth in the economy, which was close to 8%.
According to the sources, during the next several years, the federal and state governments are likely to set aside up to Rs 4 trillion ($47.89 billion) to build 20 million residences for the impoverished in rural regions, with the federal government providing around Rs 2.63 trillion.
When questioned about expenditure intentions, a spokeswoman for the finance ministry remained silent. Shortly after taking office last month, the Modi government revealed intentions to contribute to the building of 30 million homes in both rural and urban regions, without providing specific financial information. According to the second source, the Ministry of Rural Development has suggested raising state subsidies from 120,000 rupees to about Rs 200,000 ($2,395) per housing unit due to increased raw material costs.
