India plans to increase state subsidies on rural housing in the upcoming federal budget by as much as 50% from the previous year to more than $6.5 billion, after setbacks for the prime minister's party in elections, two government sources said.
The planned hike in housing subsidies is part of a broader government initiative to boost spending on rural infrastructure including village roads and a jobs programme to help millions of young people stuck in the agriculture sector amid limited manufacturing jobs.
If approved, it would mark the largest annual increase in federal spending on the rural housing programme since its inception in 2016.
Under the PM Awas Yojna(Rural) housing scheme, the government aims to facilitate construction of an additional 20 million houses over the next few years, after providing aid for more than 26 million homes for poor households over the past eight years.
Finance Minister Nirmala Sitharaman is expected to announce details of plan during the budget presentation later this month. The federal subsidies for rural housing could exceed Rs 550 billion ($6.58 billion), up from Rs 320 billion last fiscal year. The state spending on the rural jobs programme was expected to increase substantially from an earlier estimate of 860 billion rupees, but the government may seek parliament approval for this additional spending later, not as part of the budget
A separate proposal for increasing spending on village roads was also under consideration, from earlier estimates of 120 billion rupees in the current fiscal year.
To build 20 million houses for the poor in the rural areas, the federal and state governments are expected to allocate up to Rs 4 trillion ($47.89 billion) over the next few years, with the federal government contributing around Rs 2.63 trillion.
The Ministry of Rural Development has proposed increasing state subsidies to about Rs 200,000 ($2,395) per housing unit, up from 120,000 rupees previously, citing rising costs of raw materials, the second official said.
