Nirmala Sitharaman’s biggest economic challenge as she helms the Finance Ministry will be to find ways to arrest the declining growth and retain the tag of the world’s fastest growing economy, boosting consumption and investment.
Gross Domestic Product (GDP) numbers which were released onFriday are the first reality check for the former Commerce and DefenceMinister.
The GDP numbers for the fourth quarter and for the wholeyear ending March 2019 have slipped.
Sitharaman inherits a slowing economy. She will also have toensure that the Budget is presented on time addressing the slowdown concerns,expected tax revenue shortfalls and stepping up of public expenditures whilemaintaining fiscal deficit.
If rating agencies downgrade the Indian market, it willdrive away foreign investors and make it costlier for Indian companies to raisemoney abroad.
The economy grew 6.6 per cent in the three months toDecember – the slowest pace in five quarters. The bigger worry was thatdomestic consumption was not growing fast enough to offset a weakening globaleconomic environment.
The Minister will also have to prop up the four engines ofconsumption, investment, government spending and exports.
“The recent signs of slowdown in the economy stem notonly from slow growth in investments and subdued exports but also fromweakening growth in consumption demand,” industry chamber Ficci has toldthe Finance Ministry.
The economy needs far faster growth if it is to generateenough jobs for the millions of young people entering the labour market eachmonth.
Sitharaman will also have to ensure that the agriculturesector is given a boost to improve the lot of the farmer and help them doubletheir income by 2022 as promised by the previous Modi government.
For this, two mega schemes worth billions of dollars are inplace — raising MSP by 1.5 times over and above the cost of production for 24crops and the Rs 75,000 crore Kisan Yojana where Rs 6,000 is paid as directincome support to farmers.
On the financial sectors challenges, Sitharaman will have toensure PSU bank consolidation, capital infusion into weak and strong banks,provide liquidity to NBFCs, further strengthen the insolvency laws for fasterand better resolutions.
On taxation, the biggest worry at the moment, Sitharamanwill have to ensure fewer GST rate slabs, inclusion of petroleum products inthe GST fold. Implementation of the new direct tax code andcutting corporate tax rate are going to be key focus areas.