Finance Minister Nirmala Sitharaman will resume her stint in the North Block with a long-detailed agenda starting with presentation of full Union Budget for fiscal year 2024-25. However, her first important challenge will be tackling retail food inflation.

Sitharaman, 65 is credited as first full-time woman Finance Minister and so far has presented six budgets (including one interim budget).  In the interim budget for FY25, she followed convention and sticked to vote-on-accounts only. So, now all eyes are on the full budget, where she is expected to present vision for next 5 years along with some policy announcements. She will also try to address issue of employment through measures to boost the manufacturing.

Meanwhile, she has some advantage on the issue of containing fiscal deficit after record surplus transfer from the Reserve Bank of India and consistent higher collection of taxes. Now, there are two options before her. Either to lower down the fiscal deficit target of 5.1 per cent, as proposed in the interim budget to at least 10 basis points lower or stick to same target and focus on allocating more towards public expenditure. Such a move will also help in boosting the consumption as most of the economists are advocating a strong push.

The Minister is expected to continue its focus on Capital Expenditure for which ₹11.11 lakh crore has been provided in the interim budget. Though, there is no change expected in the full budget, but for remaining four years of Modi 3.0, she is likely to provide more and more money towards that.

Taking cue from BJP manifesto, Sitharaman is expected to provide more under PLI or some new innovative scheme to boost manufacturing. The manifesto promised to build on the “good success” seen in manufacturing in electronics, defence, mobile, automobiles under the ‘make in India’ programme and enhance employment in these crucial sectors.

 The party promised to turn Bharat into a global leader in Automobile and EV manufacturing as also a global leader in textile manufacturing and global electronics manufacturing hub by 2030.

One immediate key concern for her is rising retail food inflation. Though, headline inflation is around 5 per cent, but food inflation especially prices of vegetables and edible oil posing uncomfortable questions for the government.

The Minister is expected to announce new measures not just for higher production of horticulture but also for cold storage. At the same time, though focus on promoting oil seeds production has given some desirable results, but more is expected on this.

Sitharaman has a long pending agenda to push and that is GST rate rationalization. This is going to be a tricky exercise as rate rejig could take some items to higher tax bracket, which will have impact on inflation. The rate rejig is also expected to resolve inverted duty structure (where rates are low on high on input and low on output, resulting in refunds) especially in sector such as textile.

This is a politically sensitive issue as one attempt to resolve this issue in past strong resistance not just from opposition but also from BJP ruled state too forcing the GST Council to put its recommendation in abeyance.

Another key issue before Sitharaman would be to rework new pension scheme. A committee under Finance Secretary T V Somnatahan is working on this and its recommendations are expected to be made public soon.