CAUTION STILL A RULING FACTOR

Nirmala Sitharaman can't err on the side of profligacy, but must find ways to stimulate the economy while easing suffering

- M.G. ARUN

Modi 2.0 did a successful job of navigating the economic effects of the pandemic, resisting the temptation to spend excessively on doles, confining itself instead to targeted spending. Nirmala Sitharaman, who held a steady guiding hand all through, may need a new tack this time. She has to rev up slothful sectors while easing mass distress. Expect higher social spends and capex outlays in her upcoming budget in July. It will be challenging, considering the global slowdown that is only just easing, and there is no quick-fix for rising unemployment. She also has to steer inflation to tolerable levels amid fears of NPAs returning to the banking system.

WHAT NEEDS TO BE DONE

TIGHTENING BUDGET REINS The higher spend during the pandemic despite targeted relief saw fiscal deficit touch a record high in a decade. Though it has come down to 5.6% in FY24, the aim is to bring it under 4.5% by FY26. With rural distress on account of high prices and few jobs likely to have cost the BJP its majority, social sector spending could go up even as the capital expenditure on infrastructure will continue. The surplus Rs 2.11 lakh crore the RBI sent its way in May will help. As will the robust GST collections