In a few days from now, finance minister Nirmala Sitharaman will have her task cut out as she presents the fourth Budget of Modi government’s second term. As the recovery momentum wobbles a bit due to the Omicron variant, the onus of driving the economy out of the woods will be on the government.

The IMF pared India’s economic growth projections for the current fiscal slightly on the back of curbs imposed to check the latest Omicron variant. Still, it expects a healthy 9% growth mostly in line with the first advance estimates. And for the next fiscal FY23, it expects the economy to clock a growth rate of 7.1% as improved credit growth spurs consumption and investment.

The government is expected to open the purse strings and ramp up capital spending which will have a salubrious impact on the overall economy. This will help in crowding in private investment and push job creation.

This view is echoed by Gita Gopinath, first deputy managing director of IMF, as she expects the government to continue the infrastructure investment along with the asset monetisation programme.

Apart from that, the skewed nature of economic recovery is another major talking point ahead of the Budget.

In an interview to BloombergQuint, Gopinath said that the government should also address the unequal recovery through the Budget by adequately funding the rural employment guarantee scheme and ensuring free food ration beyond March. The government has extended the free food scheme, Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), till March, 2022.

She also expects the government to focus more on healthcare spending and increase education expenditure.

Gopinath said that the government should communicate a credible medium-term target for fiscal deficit that will help in keeping the financing costs down at a time when the interest rates are set to increase in advanced economies like the US.

She flagged the interest rate surge in US along with rising geopolitical tensions pushing up energy prices as challenges for emerging economies like India.