New FM Nirmala Sitharaman confronted by many challenges

Nirmala Sitharaman, who is the senior-most woman Cabinet Minister in the newly sworn-in Modi government, created history on Friday when she took charge of the Finance Ministry. She is the first woman to be given full-time charge of the Ministry.

She was also the first full-time woman Defence Minister during the first term of Modi government. Interestingly, Indira Gandhi did take charge of both the ministries for a while, but only as an additional responsibility during her tenure as the Prime Minister.

Sitharaman is also probably the first Minister of State in the Finance Ministry who has now become Cabinet Minister in the same Ministry.

A post-graduate in Economics and M Phil from JNU, Sitharaman also surprised the market, which was betting on names such as Amit Shah and Piyush Goyal for the top post.

After an announcement during the forenoon on Friday, Sitharaman first went to seek guidance from her predecessor and erstwhile boss (between May and November 2014) Arun Jaitley before coming to North Block later in the afternoon.

Now, as Union Finance Minister, Sitharaman’s first big job would be to guide the Ministry in preparing a regular Budget for the current fiscal and then present it in July. It will not be an easy task, as she will have to address many challenges. Her first big challenge is to arrest the slowdown. Though there is apprehension that the slowdown is likely to continue during the current quarter (April-June) of fiscal 2019-20, there is also hope that the economy could pick up pace in the following quarter (July-September).

Income-tax benefits

Her second big challenge is boosting both consumption and investment. But some of the signs are ominous. While industrial production turned negative in April, auto companies are facing an inventory pile up in the face of plunging demand. One of the ways of addressing the problem is by putting more money in the hands of consumers by lowering income-tax. The producers could also be offered some tax benefits. But this is easier said than done given the tight fiscal situation.

Her third task is to simplify the GST processes and lower the levy on items such as cement. The new return form for the GST is ready and a pilot is also going on. Now, she will have to push for the implementation according to the schedule and then introduce some more changes, both in the return and the e-Way bill. There is also strong pressure to bring down the 28 per cent GST rate on cement. But lowering the rate to 18 per cent could cost the exchequer up to ₹13,000 crore.

Sitharaman will also be striving to address infrastructure bottlenecks to impart competitiveness to exports. The slowdown in export has hurt the manufacturing sector, and in turn, jobs. Similarly, on the external front, there is a need to boost the FDI by providing more incentives.

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