Nirmala Sitharaman, Union Finance Minister
Sithraman, who will be presenting the full Budget for FY 24-25 in July, is expected to introduce bills soon for amendments to the Insurance Act, 1938, and the IRDAI Act to allow composite licensing for insurers
New Delhi: Indian Prime Minister Narendra Modi’s new coalition government on Monday appointed Nirmala Sitharaman, 64,as finance minister for a second consecutive term, the government said in a statement.
She also continues to be Union Minister of Corporate Affairs.
Sitharaman, who continues to be a Rajya Sabha member, was the Finance Minister between 2019-24 in the last Cabinet of the Modi government.
Sithraman, who will be presenting the full Budget for FY 24-25 in July , is expected to introduce bills for amendments to the Insurance Act, 1938, and the IRDAI Act to allow composite licensing for insurers.
She will also decide to provide large funds to capital starved three PSU general insurance companies- National Insurance Company(NIC), United India Insurance(UII) and Oriental Insurance Company(OIC), to improve their solvency.
Back in saddle in signs of Modi preferring continuity in policy, 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-rack reforms to make India a USD 5-trillion economy in near future and turn the country into a ‘Viksit Bharat’ by 2047.
Sitharaman, who became the nation’s first full-time female finance minister in 2019, is a trained economist under whose tenure the Indian economy has charted a path of high growth and fiscal prudence. But discontent in the countryside over a lack of jobs and high inflation prevented Modi’s Bharatiya Janata Party (BJP) from securing a majority, leaving it dependent on alliance partners.
The decision to keep Sitharaman as finance minister signals Modi is vying for policy continuity in his third term, said Madhavi Arora, lead economist at brokerage Emkay Global. “With Sitharaman returning to the ministry, it will be business as usual for the markets,” Arora said.
Still, Sitharaman may need to tweak policies, such as by lowering taxes for individuals and increasing handouts for the poor, to ensure that benefits of India’s high growth trickle down more widely across the Indian population. “Some of the previous government’s capex plans may be diverted to more welfare and subsidy spending,” Capital Economics said in a note after the election verdict last week.
The world’s fifth-largest economy is forecast to grow by 7.2% during the financial year ending March 2025, after a rapid 8.2% expansion the previous year. However, growth has been lopsided, with urban centres growing much faster than rural parts. During her first term as finance minister, Sitharaman took a decision to bring down corporate tax rates, hoping it would lead to a pick up in private investment and create jobs.
This has not happened and reforms needed to push investment under a coalition government may be difficult, said independent economist Govinda Rao.
“The fact that they have to depend on coalition partners constrains the (Modi) government’s ability to take fundamental reforms,” Rao said, referring to changes in the country’s land and labour laws seen as critical to boosting its manufacturing sector.
“The reforms will have to be incremental”.
MACROECONOMIC STABILITY
Over the past five years, the federal finance ministry under Sitharaman has brought down the budget gap from more than 9% of gross domestic product in 2020-21 to a targeted 5.1% for 2024-25. “A finance minister’s job is not easy; everyone wants more money and she has been able to walk on the path of fiscal consolidation,” Rao added.
India’s accounting processes have also become more transparent under her, he said. In May, S&P Global Ratings raised India’s sovereign rating outlook to ‘positive’ from ‘stable’, citing the country’s improving finances and robust economic expansion.
India’s benchmark equity indices have doubled during her five-year term, while Indian government bonds have been included in the prestigious JPMorgan Global Emerging Market Index and Bloomberg index. Investors are expected to take comfort from Sitharaman continuing as finance minister.
“Sitharaman is not prone to making dramatic changes and in that sense there is comfort that broad policy direction will continue,” said Arora.
She joins the likes of Arun Jaitley and Manmohan Singh by serving a full term as finance minister and is credited with carrying forward second-generation reforms, created a record by being the first woman to be sworn in as minister for the third consecutive term of the Modi government.
Being a fiery spokesperson of the BJP, she was inducted into the Cabinet when Modi became the Prime Minister of the NDA government in 2014.
As a staunch defender of the Modi government’s economic policies and executor, she created a record when she was appointed as the first female Raksha Mantri, or Defence Minister, in 2017.
Prior to that, she was industry and commerce minister.
When her mentor Arun Jaitley took ill, Sitharaman was given the charge of the finance portfolio in the newly re-elected Modi government after the 2019 general elections, when BJP won its highest seats of 303.
The following year, 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.
To overcome the hardship during the pandemic, the government announced a special economic package worth Rs 20 lakh crore equivalent to roughly 10 per cent of India’s GDP.
She steered the economy from nearly 24 per cent contraction in the first quarter of FY21 to the fastest growing world economy.
Despite fiscal expansion, she continued to follow the path of fiscal consolidation and was successful in bringing down the fiscal deficit to 5.6 per cent of GDP from the earlier estimate of 5.8 per cent in FY24.
She is the first full-time woman finance minister of the country. Earlier, Indira Gandhi had held finance as an additional portfolio for a short duration when she was the Prime Minister of India.
Despite fiscal expansion, she continued to follow the path of fiscal consolidation and was successful in bringing down the fiscal deficit to 5.6 per cent of GDP from the earlier estimate of 5.8 per cent in FY24.
She also set a record by presenting the sixth Budget in a row — five annual Budgets and one interim — a feat achieved so far only by former Prime Minister Morarji Desai.
After the Modi government came to power in 2014, Arun Jaitley took charge of the Finance Ministry and presented five Budgets in a row from 2014-15 to 2018-19.
In 2017, Jaitley departed from the colonial-era tradition of presenting Budget on the last working day of February to 1st of the month.
Following the footsteps of her mentor, Sitharaman also did away with the traditional Budget briefcase and instead went for a bahi-khata with the National Emblem to carry the speech and other documents.
Born in Madurai on August 18, 1959 to Narayan Sitharaman (who worked in the Railways) and Savitri (a homemaker), Nirmala Sitharaman studied economics at Tiruchirapalli’s Seethalakshmi Ramaswami College.
She then moved to the capital to pursue her Master’s and M.Phil in the subject from Jawaharlal Nehru University (JNU).
But before Sitharaman forayed into politics, she was part of the corporate world in the UK, where she was living with her husband Parakala Prabhakar. The two had met while studying at JNU, and tied the knot in 1986; they have a daughter, Parakala Vangmayi.
Sitharaman’s political career began in 2008 when she joined the BJP (she returned to India in the early 1990s), and in two years became the party’s second woman spokesperson after Sushma Swaraj, fielding questions from journalists at the party headquarters and also becoming a familiar face on television debates.
Prior to taking the political plunge, she served as a deputy director of the Centre for Public Policy Studies in Hyderabad, and also started a school in the city.
From 2003 to 2005, she was also a member of the National Commission for Women.