NEW DELHI/ WASHINGTON: Flagging concern over the current high inflation in India, Union finance minister Nirmala Sitharaman said that energy and food security risks are the main problems in the country and that they need to be watched out for.
She said the twin challenges of a slowing growth rate and high inflation will be “carefully structured” in the upcoming Budget for the next financial year in order to help the economy sustain growth momentum and rein in prices. Sitharaman was addressing a gathering at an event in Washington on Tuesday.
The finance minister is on a weeklong visit to the US and is scheduled to hold several meetings with leaders and heads of the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the European Commission as well as the United Nations Development Programme, among other meetings.
In a meeting with the US treasury secretary Janet Yellen on Tuesday, Ms Sitharaman discussed a range of issues, including bilateral relationships, the global situation, as well as India’s upcoming G-20 Presidency.
Addressing a gathering in Washington DC, the finance minister claimed that India’s growth rate will be around seven per cent this financial year. “I am very much aware of growth forecasts being lowered around the world, but I am confident of India’s relative and absolute growth performance in the rest of the decade,” Sitharaman responded to a query on the sidelines of an annual meeting of the IMF and World Bank.
Sitharaman identified high energy prices as one of the biggest problems that poses a challenge for the Indian economy. She said that the energy price and availability are not long-term or medium-term but are India’s biggest short-term challenges.
Responding to a question, the minister said the global stress that hits India — the energy, fertiliser or food—is being carefully monitored and the government is making sure that stress doesn’t get passed on to the people.
She added, “The excise duty on fuel was brought down so that the common citizen doesn’t bear the brunt of increasing fuel prices. That is one way in which we’re making sure that those in the vulnerable sections don’t get hurt.”
When asked about any specifics on the upcoming Budget for next financial year, she said, “Specifics (of the next Budget) may be difficult at this stage because it’s a bit too early. But broadly, the growth priorities will be kept absolutely on the top. Even as I speak about the concerns that inflation brings before me… so inflation concerns will have to be addressed. But then how would you manage growth would be the natural question.”
The finance minister’s reactions come at a time when almost all institutional and private forecasters have cut their projections for India’s GDP growth in the current fiscal (2022-23) on tighter monetary policy by the Reserve Bank of India (RBI), denting demand even as the economy is facing headwinds from a global slowdown. Besides, the growth momentum in the Indian economy seems to be waning, as seen in a slowdown in industrial production and exports. Inflation has hovered above the Central bank’s tolerance limit of 6 per cent for most of the year.
“But that’s the point of being sure how you’re going to be able to balance the two and be sure that the momentum that the Indian economy has got coming out of the pandemic and the momentum with which it will grow even next year, even as per the many multilateral institutions which are observing India, cannot be weakened,” the finance minister said, adding, “So, it will have to again be a carefully structured Budget in which growth momentum will have to be sustained.”
The RBI in its last monetary policy also cut its projection of India’s GDP growth in the current fiscal to 7 per cent from 7.2 per cent previously estimated. Other rating agencies too have lowered the economic growth projection for India, citing the impact of geopolitical tensions, tightening global financial conditions and slowing external demand.
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