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Back in the saddle, with signs of Prime Minister Narendra Modi preferring continuity in policy, Finance Minister Nirmala Sitharaman is likely to lay out the government’s economic agenda when she presents the first annual budget of Modi 3.0 next month.

Her task is cut out as she will have to look at measures to boost growth without hurting inflation as well as look for resources to meet the coalition government’s compulsion.

The economic agenda would include steps to fast-track reforms to make India a $5-trillion economy in the near future and turn the country into a ‘Viksit Bharat’ by 2047. Last week, the Reserve Bank of India (RBI) projected the economy to grow 7.2% in the current fiscal on the back of improving rural demand and moderating inflation.

The new government inherits a strong economy with fiscal prudence in place. The icing on the cake is a bonanza from the RBI, which has announced the highest-ever dividend of Rs 2.11 lakh crore for FY24.

The key policy priorities for the Modi 3.0 government would include dealing with stress in the agriculture sector, job creation, sustaining capex momentum, and pushing revenue growth to stay on the fiscal consolidation path.

Rating agency S&P has already given a thumbs-up to the economic policies followed by the Modi regime in the past 10 years by upgrading the sovereign rating outlook to positive. It has also hinted at a possible rating upgrade in next 1-2 years provided the government sticks to its fiscal deficit roadmap.

While tax revenues seem to be buoyant, non-tax revenue remains a challenge as strategic disinvestment has almost been a non-starter with no big ticket strategic sale, except Air India.

Strategic sale of a host of CPSEs (central public sector enterprises), including Shipping Corporation, NMDC Steel Ltd, BEML, PDIL and HLL Lifecare, are in the pipeline. IDBI Bank is also stuck in security and fit and proper clearances of bidders.

Banking sector reforms is another area where the government is facing a lot of resistance. It has not been able to carry forward the policy of privatising a few public sector banks as well as insurance companies.

On the tax revenue side, while monthly GST mop-ups have been comfortable, the GST Council, chaired by the Union Finance Minister and comprising state counterparts, will have to bite the bullet with tax rate and slab rationalisation to usher in GST 2.0.

Sitharaman was given the charge of the finance portfolio in the second stint of the Modi government after the 2019 general elections, becoming the first full-time woman finance minister in independent India.

Under her leadership, India weathered the Covid-19 pandemic with an array of policy measures announced for the poor and continued its tag of the fastest growing major economy and a ‘bright spot’ in the world economy.