FM hints at more reforms, steps for ‘ease of living’

The National Democratic Alliance (NDA) government, in its third term, will take more steps to ensure “ease of living” and undertake various reforms to support macroeconomic stability and faster economic growth, finance minister Nirmala Sitharaman said on Wednesday after assuming charge.

The finance ministry also quoted the minister as saying that the economic outlook for the coming years is “optimistic”.

Sources said the full Budget for FY25 would include a directional road map for the next five years. Policies would be aligned with the vision of making India a developed country (Viksit Bharat) by 2047, the centenary year of Independence.

Also Read Budget 2024 Date Live Updates: When will Nirmala Sitharaman announce Union Budget 2024? How payment for notice period by salaried employees is taxed Railway Budget 2024 Highlights: FM Nirmala Sitharaman puts spotlight on metro and Namo Bharat in post-Interim Budget presser Budget may be presented around July 10-12

The Budget may also revamp some of the existing schemes, including those meant for welfare and investment promotion. Some of these may be extended beyond the current end dates.

The Budget is likely to be presented in Parliament in the week of July 15-21.

According to the ministry, the FM stressed that reforms undertaken since 2014 would continue, while highlighting the country’s “commendable growth story” in recent years amid global challenges.

Another source said rural demand may get a fillip from the Budget measures. However, the government is likely to refrain from announcing any new large-scale handouts. There is a sense that the rural demand dip is seasonal.

Nonetheless, rural employment could be the focus of the new government, and more support to MSMEs could be one way of job creation. Providing credit to informal micro enterprises and fillip to exports, including from rural areas, would create sustainable rural demand, the source quoted above added.

The government could also focus attention on crop diversification to reduce imports of pulses and edible oils. Existing schemes like free ration under PM Garib Kalyan Anna Yojana (extended to 2028) would mitigate the impact of food inflation on the rural population.

On assuming office for her second term in the ministry, Sitharaman was briefed about the ongoing policy issues by finance secretary TV Somanathan and other secretaries.

After assuming power for the third straight time, Prime Minister Narendra Modi has announced financial assistance for building additional 30 million affordable houses in rural and urban areas, indicating the policy direction. The government is expected to extend PM Svanidhi (which offers collateral-free working capital loans of up to `10,000 to street vendors) to small towns and villages. Similarly, free electricity to poor households under PM Surya Ghar Muft Bijli Yojana is expected to further ease living and prop up rural demand.

Sitharaman acknowledged the strong leadership and development-oriented governance in the last 10 years, which have driven transformative changes across various sectors and created a robust and resilient economy.

Also Read Nirmala Sitharaman reappointed as Finance Minister

In FY24, India’s real GDP accelerated to 8.2% from 7% the previous year, driven by gains in gross fixed capital formation as the government’s infrastructure programme gained further traction even as private consumption remained subdued.

The higher-than-expected dividend of `2.11 trillion from the Reserve Bank of India (RBI) against the budget estimate of `80,000-90,000 crore could let the Centre reduce its market borrowings and fiscal deficit in FY25 or pump in more money into schemes and capex. The extra transfer by the RBI is almost 0.4% of GDP, and may help it bring fiscal deficit down further to 4.8%-4.9% of GDP from the interim Budget estimate of 5.1% for FY25 if additional spending is not undertaken.

At the Centre, as the ruling BJP fell short of an outright majority, the NDA government will need to rely heavily on its coalition partners and passing contentious reforms could prove more difficult, particularly around land and labour, which have recently been flagged as priorities by the BJP to boost India’s manufacturing competitiveness, rating agencies have said.