Govt said to plan raise in rural housing subsidies by 50% after election setback

India plans to increase rural housing subsidies by 50% in the upcoming budget to boost infrastructure and jobs.

India plans to increase state subsidies on rural housing in the upcoming Union Budget by as much as 50% from the previous year to more than $6.5 billion, after setbacks for the Bharatiya Janata Party (BJP)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 central spending on the rural housing programme since its inception in 2016.

"The government is worried over widespread rural economic distress, driven by higher food inflation and sluggish growth in farmers' incomes," said one of the government sources with knowledge of budget discussions.

Shares of Housing and Urban Development Corp rose as much as 9% after the Reuters report, while Aadhar Housing Finance and GIC Housing Finance rose around 4.5%.

Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) is having to rely on allies to run the government for the first time in a decade, after the opposition did much better than expected in a bitterly fought national election that ended last month.

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.