Finance Minister Nirmala Sitharaman on Wednesday took charge and resumed her work in the North Block. This is her second term in the Ministry as a Cabinet Minister and overall, her third term as she was a Minister of State during the first term of the Modi Government (2014-2019).
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Her first and most important duty will be the presentation of the full Union Budget for Fiscal Year 2024-25. Though the date has not been announced officially, it is likely to take place during second half of next month.
Sitharaman, 65, is credited as first full-time woman Finance Minister and so far has presented six budgets (including one interim budget). In the interim budget for FY25, she followed convention and stuck to vote-on-accounts only. All eyes are now on the full budget, where she is expected to present the vision for the next 5 years along with some policy announcements. She will also try to address issue of unemployment through measures to boost manufacturing.
Record surplus transfer from the Reserve Bank of India and consistent higher collection of taxes has given Sitharaman some advantage on the issue of containing fiscal deficit. She has two options before her now. She can either decide to lower the fiscal deficit target of 5.1 per cent, as proposed in the interim budget, by at least 10 basis points or stick to the same target and focus on allocating more toward public expenditure. The move to increase allocation of public expenditure will also help boost consumption as most economists are advocating for a strong push.
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The Minister is expected to continue its focus on Capital Expenditure for which ₹11.11 lakh crore has been provided in the interim budget. Though there is no change expected in the full budget; for the remaining four years of Modi 3.0, she is likely to provide more towards it.
Taking cues from BJP’s manifesto, Sitharaman is expected to provide more under PLI or some new innovative scheme to boost manufacturing. The manifesto promised to build on the “good success” seen in the manufacturing of electronics, defence, mobile and automobiles under the ‘make in India’ programme and enhance employment in these crucial sectors.
The party promised to turn Bharat into a global leader in Automobile and EV manufacturing as well as a global leader in textile manufacturing and global electronics manufacturing hub by 2030.
One immediate key concern for her is the rising retail food inflation. Though, headline inflation is around 5 per cent, food inflation especially the prices of vegetables and edible oil pose uncomfortable questions for the government.
The Minister is expected to announce new measures not just for higher production of horticulture but also for cold storage. At the same time, more focus is expected on promoting oil seeds’ production as it has given some desirable results.
Sitharaman has a long pending agenda to push the GST rate rationalization. This is going to be a tricky exercise for the Modi-led Government as rate rejig could take some items to higher tax brackets, which will have an impact on inflation. The rate rejig is also expected to resolve the inverted duty structure (where rates are low on high on input and low on output, resulting in refunds) especially in sector such as textile.
