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In a sign of Prime Minister Narendra Modi's preference for policy continuity, Finance Minister Nirmala Sitharaman is poised to outline the government's economic agenda as she presents the first annual budget of Modi 3.0 next month.

 

Sitharaman faces the task of balancing measures to boost growth without fueling inflation, while also addressing the coalition government's priorities.

 

The economic agenda aims to expedite reforms to propel India toward becoming a USD 5-trillion economy in the near future, with aspirations to achieve a developed India by 2047.

 

The Reserve Bank of India (RBI) recently projected a 7.2 percent growth for the current fiscal year, citing improving rural demand and moderating inflation as key factors.

 

With a robust economy and fiscal discipline in place, the government also enjoys a windfall from the RBI, which announced its highest-ever dividend of Rs 2.11 lakh crore for FY24.

 

Key priorities for Modi 3.0 include addressing agricultural sector distress, fostering job creation, maintaining capital expenditure momentum, and bolstering revenue growth to adhere to fiscal consolidation goals.

 

S&P, the rating agency, has lauded the economic policies of the Modi government over the past decade, upgrading the sovereign rating outlook to positive.

 

However, it hinted at a possible further upgrade in the next 1-2 years contingent upon the government's adherence to its fiscal deficit targets.

 

While tax revenues remain strong, non-tax revenue presents a challenge, particularly with strategic disinvestment efforts stalled, aside from the sale of Air India.

 

Efforts to privatize select public sector banks and insurance companies have faced resistance, while the banking sector awaits reforms amid hurdles.

 

On the tax revenue front, although monthly GST collections have been robust, there's a need for the GST Council to consider rationalizing tax rates and slabs to usher in GST 2.0.

 

Sitharaman, the first full-time woman finance minister in independent India, assumed the finance portfolio in Modi's second term after the 2019 general elections.

 

Under her stewardship, India navigated the challenges of the Covid-19 pandemic with a slew of policy interventions aimed at supporting the vulnerable, maintaining its status as the world's fastest-growing major economy, and a beacon of resilience in the global economic landscape.