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Economy is recovering from second wave challenges: FM

On Monday, finance minister Nirmala Sitharaman said the government will keep supporting the economy while it is coming out of the challenges of the second covid wave. She expects inflation to remain within the comfort level of the central bank.

“Inflation has come down well below the 6% ceiling, core sector growth has been substantial. Power consumption has gone up. Private sector coming out in a big way to show their keenness to expand their manufacturing programs. The economy is clearly coming out of the challenges of the second wave. We are here to hear and keep responding because we need to give that support to the economy," she said while interacting with the media.

Retail inflation had eased to 5.6% in July after remaining above 6% for two consecutive months.

Sitharaman said she wouldn’t allow inflation to worry her even if she focuses on growth.

“I am confident because there has been a lot of monitoring of essential goods. We are also focusing on removing supply constraints," she added.

Sitharaman said the expenditure cut asked of ministries is only wasteful expenditure related to revenue, and capital expenditure (CAPEX) will not be reduced. “It has no bearing on the proposed CAPEX of any department. We are not giving any confusing signals. To some departments, I have even asked to advance CAPEX by one quarter," the minister clarified.

In June, the finance ministry asked all departments to cut “avoidable, wasteful and controllable" expenses such as overtime allowance and travel by 20% amid concerns that the fiscal deficit may overshoot the FY22 target of 6.8% of the GDP due to rising covid-related bills.

Sitharaman said between FY15 and FY21, the NDA government had paid interest worth ₹70,196 crores on oil bonds issued by the UPA government, while the total outstanding, including both principal and interest payments, is ₹1.68 trillion by FY26. “The UPA government reduced the price and put the burden on oil marketing companies. Today, you are asking me why the Centre is not reducing the price. I am paying for the reduction of price by UPA then," she added.

When asked whether she is suggesting that there will be no price cut, Sitharaman said: “I am not suggesting any such thing. When the prices were low, issues were different. When prices are high, issues are different. Fuel is a difficult issue and the petroleum ministry is seized of the matter."

On rationalizing goods and services tax (GST) rates, Sitharaman said she has not forgotten about it during covid. “In February and October 2020, we presented an agenda to the GST Council whether they want to do it. The Council in its wisdom, and rightly so, said it may not be the appropriate time."

Last month, chief economic adviser Krishnamurthy Subramanian said the rationalization of GST structure into three slabs by merging two existing slabs is on the cards, and progress should be seen soon.

On cryptocurrency, Sitharaman said she is waiting for the bill to be cleared by the cabinet. “Cryptocurrency will be regulated, not banned. That position hasn’t changed," she added.

Asked whether Cairn Energy has responded after initial consultations with the finance ministry after the retrospective tax was annulled, Sitharaman said finance ministry officials are explaining various critical features of the amendment to Cairn. “To be fair to them, the rules are yet to be notified. I don’t want to say they haven’t come back. We are almost at the final stages of putting up the rules," she added.


Credit: Mint | 17 Aug 2021

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