By K Raveendran
Having been confirmed as the finance minister in the Modi 3:0 cabinet, Nirmala Sitharaman is more pressed for time compared to her other colleagues as the budget of the new government is hardly a month away. And her budget-making this time is more complex as she has to accommodate the compulsions of coalition politics as well. Overall, she faces a complex landscape of economic challenges.
After Prime Minister Narendra Modi failed to win a clear majority for the BJP, his government has been forced to secure the support of coalition partners — Chandrababu Naidu’s TDP and Bihar strongman Nitish Kumar’s JD-U, both prone to switching loyalties at the drop of a hat. The implications for Modi 3:0 need no elucidation. Nirmala Sitharaman has to navigate diverse interests, manage expectations and build consensus on economic policies, none of which is an easy task.
Coalition dynamics will constantly demand her attention. Satisfying alliance partners’ demands without compromising economic stability is a delicate task, marked by intricate challenges. She must find common ground while safeguarding the nation’s financial health, and this will call for a rare ability to balance fiscal conservatism, coalition realities, and growth imperatives.
Nirmala Sitharaman has been at the helm of India’s finance ministry for five years, presenting six consecutive budgets. Her appointment as the first woman to hold this position for a full term marked a significant personal milestone. During her tenure, she implemented key reforms, including reducing the base corporate tax rate from 30 percent to 22 percent and announcing a Rs 20 lakh crore special economic package to combat the pandemic-induced economic challenges.
Sitharaman is seen likely to adhere to her previous policies, aiming for fiscal consolidation. Her past efforts reduced the fiscal deficit from 5.8 percent to 5.6 percent and the commitment to prudent fiscal management will be crucial in the current context. As the Indian economy operates in a dynamic global environment, she also has to steer it through geopolitical tensions, trade disruptions and economic shifts worldwide. Managing these uncertainties while safeguarding India’s interests is no small feat.
The pandemic-induced economic slowdown continues to strain government finances. The finance minister has to, therefore, strike a delicate balance between stimulating growth and maintaining fiscal discipline. Ensuring prudent spending while addressing pressing needs will be a tightrope act. The middle class eagerly awaits relief from inflation, tax burdens, and rising costs and the budget decisions will directly impact their lives. Meeting their expectations while maintaining fiscal prudence is a formidable challenge.
The election results have given the ruling party a crude shock that the real issues that determine voter behaviour go beyond the routine rhetoric of identity politics, which Modi has been trying to exploit throughout the 2024 election campaign. He hopped from one divisive issue to another through the various phases of campaigning, little realising that people at the grassroots level were more worried about their daily lives than issues of faith or identities.
This has put an additional burden on the new government, which means adequate resources have to be found to pursue employment creation, a low priority for the Modi government ever since it came to power in 2014, despite tall claims to the contrary from time to time. The government has been trying to counter the lapse through dubious attempts to re-interpret statistics and definitions of employment.
There has been talk about a national employment policy, which, however, remained at the academic level. With 90 percent of employment accounted for by the informal sector, the employment generation schemes of the government have largely bypassed this most important section of the army of unemployed. It has been proved beyond doubt that “pakora economics” does not work and rural youth need real and paying jobs. This will mean Nirmala Sitharaman has to concentrate more on this vital section of the population.
Modi has been promising to double farmers’ income, but the situation on the ground has been quite different. The farmers have been agitating against the policies of the central government and the ruling party has had to pay a heavy price for the approach of dismissal towards these problems. It is now time to atone and Nirmala Sitharaman has to allocate adequate resources for this in her budget. This has never been an overriding consideration for her previous budgets.
Additionally, as the country aspires to become a $5 trillion economy, the finance minister has to drive growth by encouraging investment and innovation alongside job creation. Balancing short-term measures with long-term structural reforms is crucial. (IPA Service)
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