Modi 3.0: Nirmala Sitharaman returns as India's finance minister

Finance Minister Nirmala Sitharaman

Nirmala Sitharaman has been appointed as finance minister in Prime Minister Narendra Modi's government. The Cabinet details were revealed on June 10, a day after the ministers took the oath along with Modi.

Sitharaman, a two-time union minister in Modi-led cabinets (2014 and 2019) is a part of the new Council of Ministers for a third time.

Her return to the finance ministry puts to rest days of speculations over a change in portfolio for India's first full-time female finance minister.

Before taking charge of finance ministry on May 31, 2019, Sitharaman has served as commerce and defence minister.

Sitharaman has been credited for stewarding the Indian economy in the right direction during a once-in-a-lifetime pandemic and placing the country on the path of becoming the fastest growing major economy at a time of recessionary fears across the globe.

India is now the world's 5th largest economy and remains a bright spot even in comparison to developed nations. In January-March 2024, GDP growth in US slowed sharply to 1.6 percent and Germany and Japan saw contractions.

During that same period, India registered a GDP growth of 7.8 percent, with the full year figure now expected to be above 8 percent for FY24.

Sitharaman will now be gearing up for her 7th Budget, widely expected to be presented next month.

On February 1, she presented the interim annual financial statement in which the government kept away from making any big-bang announcements despite it being an election year.

All eyes will now be on the full Budget for 2024-25 wherein Sitharaman is expected to strike a balance between continued fiscal consolidation and measures to address India's weaker rural growth and consumption levels. This, especially given that the Narendra Modi-led government's third term lacks the absolute majority that it enjoyed during the previous two regimes.

Data shows that at a time when the country is expected to grow at a world-beating 8.2 percent for FY24, private consumption of around 4 percent is at a 20-year low outside of the pandemic year and farm sector growth remains at an abysmal 1.4 percent as against 4.7 percent in 2022-23.

The Centre has kept the fiscal deficit target at 5.1 percent of the GDP, while keeping the focus on higher capital expenditure with a record allocation of Rs 11.1 lakh crore for FY25.

Though, Sitharaman's reappointment signals policy continuity, it would be interesting to see whether the Centre uses the bumper dividend of Rs 2.11 lakh crore from the central bank for more aggressive fiscal consolidation, or deploys it, partly, if not fully, for consumption-boosting measures.