Modi 2.0 has successfully dealt with the economic effects of the pandemic, not being too eager to spend excessively on handouts and sticking to the set spending targets. Nirmala Sitharaman, who has been playing a strong role throughout this period, may now have to take a new position. She has to bring the sluggish sectors back on track as well as remove the general frustration. In her upcoming budget in July, we can expect higher allocations for social spending and capital expenditure. This will be challenging because the global recession has just started to ease and there is no immediate solution to address rising unemployment. She also has to bring inflation to a tolerable level amid fears of the return of bad loans in the banking system.
What needs to be done
- tightening the budget – Despite targeted relief, the fiscal deficit reached the highest level of this decade due to high spending during the pandemic. However, it came down to 5.6 percent in FY24. The target is to reduce it to 4.5 percent by FY26. Rural frustration due to high prices and fewer jobs seems to be costing the BJP its majority. Social spending may also increase while capital spending on infrastructure may continue. The surplus of Rs 2.11 lakh crore sent by the Reserve Bank in May will help. Also, strong GST collection will also help.
- Increasing consumption – Despite the corporate tax cuts, ease of doing business improvements and production-linked incentives launched by Modi 2.0, private investment has continued to lag. The lack of demand can be blamed for which the government will have to do two things – rationalize income tax rates and reduce tax rates or increase the existing slabs for tax rates so that more money goes in the hands of the people or reduce GST rates to reduce indirect taxes on key commodities.
- rein in inflation – Food inflation is hurting the public as shown by ground reports in this election. One way to reduce it is to reduce fuel prices, which is possible given that states like Maharashtra are going to polls.
- rationalising the tax structure – Multiple tax slabs, their compliance, delayed refunds and technical glitches have been a major hurdle for GST, main rates to be reduced from four to two.
- Putting key reforms on the ground – It would not be practical to expect that big steps like land and labour reforms be taken. But for faster resolution, the Insolvency and Bankruptcy Code can be reformed. Similarly, the Insurance Act and the Insurance Regulatory and Development Authority of India can also be reformed. The draft of the Digital Competition Bill is being worked on in the Ministry of Company Affairs, work can also be done on that.
Who is responsible for this?
Nirmala Sitharaman, 64 years: BJP
Minister of Finance and Corporate Affairs
- Early life – Born in a Tamil Iyengar family in Madurai, Tamil Nadu, Nirmala Sitharaman completed her schooling in Madras and Tiruchirappalli. After graduating in economics, she went to Jawaharlal Nehru University for post-graduation studies.
- Political journey – Nirmala was a member of the National Commission for Women from 2003 to 2005. She joined the BJP in 2008 and was the party spokesperson till 2014. When the Modi government came to power for the first time in 2014, she was included in the Union Cabinet on the basis of being a Rajya Sabha member from Andhra Pradesh.
- Current role She was the Minister of State in the Ministry of Finance and Corporate Affairs for some time in 2014. From May 2014 to September 2017, she had independent charge of Commerce and Industry. She was the Defense Minister between September 2017 and 2019. After that, she has been in this position since she got this department till now this year. She represents Karnataka in the Rajya Sabha.
state Minister
Pankaj Choudhary, 59 years: BJP
- Political journey – Starting his political career as an independent councillor of Gorakhpur Municipal Corporation in 1989, Choudhary is a seven-time MP from Maharajganj in Uttar Pradesh and will take over as Minister of State for Finance for the second time