To begin with, Sitharaman will have a better elbow room with a bumper dividend of Rs 2.1 lakh crore from the Reserve Bank of India (RBI) against Rs 87,416 crore in the previous financial year. Sources said that she may opt to use a part of it to reset the fiscal deficit target – lower than the projected 5.1 per cent while directing the rest to foot the bills for other expenses. 

After some rather lackluster Union budgets – including the 2023-24 one – Sitharaman refrained from making any big bang announcement in the interim Union Budget. Pundits believe that this budget presentation may have some mega announcements.

Most of the big bang announcements that NDA made in the last few years, such as the massive Rs 76,000-crore incentive scheme for development of semiconductors and display manufacturing ecosystem – were made outside the Union Budget. 

While presenting the interim budget, Sitharaman announced raising capital expenditure outlay for the next year by 11.1 per cent to Rs 11.11 lakh crore – 3.4 per cent of the GDP, this time, the focus is set to be more on the farm sector, which has seen a muted growth.

That apart, issues related to environment, artificial intelligence, and climate change are also set to be part of the Budget announcements.

The regulators including the RBI and Securities and Exchange Board of India (SEBI) have already tweaked several norms to take into account climate related risks, especially amid India’s stiff target to achieve net zero carbon emissions by 2070.

According to sources, Sitharaman will stick to pro-business policies but at the same time carve out specific measures that promise expansion of employment and income opportunities in the smaller towns and villages. 

“Agricultural sector and employment generation are important challenges that will be met head-on. Budget exercise will start soon and the 125-day agenda implementation is in full swing,” Gopal Krishna Agarwal, national spokesperson of BJP’s economic affairs, told The Secretariat.

Issues That Need Attention

Job opportunities for India’s youth will be Sitharaman’s primary challenge. Though as finance minister, she will be able to do little to directly create jobs, her economic policies will be scrutinised with a fine-tooth comb. The Modi government has come under the spotlight for being unable to generate jobs, despite maintaining a GDP growth rate of 8.2 per cent in 2023-24.

Global uncertainties have also hit the exporters and micro, small and medium enterprises (MSME) sector—critical for large-scale job generation.

“The RBI has projected growth to be nearly 7.5 per cent this financial year but the concern over employment creation remains. During this term, the government must focus on employment creation. Economic policies must be geared towards preventing companies from moving their bases to other countries due to lack of ease in doing business,” Nirupama Soundararajan, Founder & Partner of Policy Consensus Centre, told The Secretariat.

“The government may be on the right path for economic growth, but this would be meaningless if it comes without employment,” Soundararajan said, adding that a large sum has been directed for infrastructure development but importantly the spending should help in creating new employment opportunities. 

Despite the Modi government’s efforts to boost the manufacturing sector, issues such as inverted duty structure  and red tape continue to plague foreign and domestic investors.

The issue of high duties on raw materials has been a thorny issue for many years. However, it may not be easy for the Finance Minister to tackle the situation. In fact, the Swadeshi Jagran Manch, affiliated to the Rashtriya Swayamsevak Sangh has been demanding the raising of tariffs for raw materials – a move that it feels will protect Indian manufacturers.

Sitharaman’s reiteration of the “sabka saath, sabka vikas” ethos of the Modi government “will be amplified.” Expect her to refer to this phrase multiple times.

“In the second term, our government strengthened its vision of Sabka Saath, Sabka Vikas, and Sabka Vishwas,” she said while presenting the interim Budget in February.

Adding that the country managed to tide over the Covid crisis, Agarwal said that economic reforms will continue.

“Infrastructure spending, support to manufacturing, particularly MSME and targeted approach on upcoming sectors like AI, Space, etc will guide policy decisions,” he added.

Tax Rates

Will the Finance Minister provide relaxation on personal income tax rates and slabs? The Opposition has repeatedly alleged that the NDA government’s tax policies have benefited the large corporations. Earlier, Congress General Secretary Jairam Ramesh claimed that the money that accrued from personal income tax was higher than corporate tax.  

Sitharaman’s achievements:

The Indian economy, under her aegis, by and large, managed to regain the growth momentum after the Covid shock. India registered an economic growth rate of 8.2 per cent for 2023-24 and 7.8 per cent for the fourth quarter—January to March period. Most rating agencies and multilateral lenders such as the World Bank and International Monetary Fund have projected India as one of the fastest-growing economies.

She deserves credit for bringing the fiscal deficit to a manageable level despite the Covid shock. India’s fiscal deficit for 2023-24 stood at Rs 16.54 lakh crore — 5.63 per cent of the GDP. This is lower than the previously projected 5.8 per cent. The government plans to bring down the fiscal deficit to 4.5 per cent of GDP by FY26.

As Sitharaman assumed charge of the ministry on Wednesday, she said that the government is fully committed to ensuring ‘Ease of Living’ for the citizens. She added that steps would be taken in this regard.

Sitharaman noted that the government believes in ‘Sabka Saath, Sabka Vikas, Sabka Vishwas, Sabka Prayas’ and called for support and cooperation from all stakeholders, including industry leaders, regulators, and the citizens, to ensure a strong and vibrant economy.

Clearly, the first Union Budget of NDA 3.0 will be a mood setter throwing up a broad contour of the economic roadmap ahead. However, implementation of the announcements needs to be monitored.

The finance minister will have to delicately balance between being pro-business with having a sharp focus on the poor.