FM Sitharaman is doing well as Modi 3.0 is ready to unveil the whole budget

The reappointment of Nirmala Sitharaman as Finance Minister is a strong indication of Prime Minister Narendra Modi’s commitment to maintaining the current course of the government’s economic strategy.

Sitharaman’s return follows a good track record in which the Indian economy grew by a strong 8.2 percent in 2023–2024—the highest growth rate among the world’s major economies—and saw inflation drop to less than 5 percent.

The budget deficit was also decreased during her leadership as Finance Minister, going from almost 9% of GDP in 2020–21 to the desired 5.1% for 2024–25. The economy’s macroeconomic foundations have been reinforced as a result. S&P Global Rating upgraded India’s sovereign rating outlook from “stable” to “positive,” highlighting the nation’s robust economic development and strengthening its financial situation.

Sitharaman now faces the task of presenting a full budget that ensures the economy continues on its high growth trajectory and creates more jobs while also taking the aspirations of the Modi 3.0 coalition partners into consideration. This is after he presented an interim budget ahead of the Lok Sabha polls.

There are concerns that the budgetary demands of the coalition partners might cause money to be diverted from social welfare programs and increased state funding to infrastructure projects that promote development.

Nonetheless, the Finance Minister has a lot of leeway to go on with measures meant to accelerate development because of the low budget deficit, the substantial Rs 2.11 lakh crore dividend from the RBI, and the buoyancy in taxes.

The government intended to rationalize the Goods and Services Tax (GST) by decreasing the number of tax slabs from four to three as part of the next generation of economic reforms. This move was intended to facilitate revenue collection and compliance. This may now need to be postponed, however, since adjusting the GST rates on semi-essential goods—which are now subject to 12% or 18% tax—may result in an increased tax burden on essential goods, which are subject to a lower 5% tax.

It may also be necessary to postpone some of the most important economic changes, such as facilitating the hiring and firing of workers by companies, in order to guarantee greater productivity levels that would ultimately spur development and create more employment.

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