FM Sitharaman reveals how the govt will build its way to economic revival

Finance Minister Nirmala Sitharaman says, present growth momentum to continue in medium-term. Citizens are working with Centre and states towards recovery This cooperation will put India on growth trajectory, she says. 

Speaking to Business Standard’s Shrimi Choudhary and Arup Roychoudhury, Union Finance Minister Nirmala Sitharaman on Friday showed confidence in the robustness of the Indian economy. It is despite the upheaval caused by pandemic, which, the FM said, even forced the government to consider presenting five “mini budgets” in 2020. She said that the government has turned to a public capital expenditure programme to revive the demand during the tough period.

The FM said that spending on capital assets was chosen since the government had adopted that route for economic revival during the pandemic too. Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc.

The Centre’s capex outlay is estimated at 7.5 trillion rupees in FY23. According to the FM, of that, 1 trillion rupees will go to states as a long-term, interest-free loan for their capex needs.

In comparison, the government’s capital expenditure through budget was Rs 3.35 trillion in 2019-20.

The entire 1 trillion rupees could be given to states in the July-September quarter itself. The FM said that the rules for distributing the loan had been framed. Many states were ready as they have already submitted their projects -- both greenfield and brownfield-- for evaluation. Sitharaman was confident that the amount would be picked up by states before the end of the second quarter.

The FM also tried to assuage the concerns around the fiscal deficit, saying that despite continuing external headwinds, they are under control.  

Finance Minister Nirmala Sitharaman says revenue buoyancy provides bit of comfort and will continue sourcing materials from specific places to cut cost. Strong centre-state synergy to continue, she says. 

Speaking on the soaring inflation, which is giving a tough time to policymakers, FM Sitharaman said it is still nowhere close to what other countries are seeing. But, at the same time, she conceded that it is “burdensome” for people, especially those with low income.

From 3.4% in FY19, retail inflation showed a continuous rise to 4.8% in FY20 and 6.2% in FY21, before easing moderately to 5.5% in FY22. 

Headline retail inflation for May 2022 cooled down from the 8-year high of the previous month to settle at 7.04 per cent. The Reserve Bank of India expects inflation to average above the 6 per cent mark till the October-December quarter.

The FM also said that the bank privatisation plans were almost ready and the government would bring amendments to the Banking Regulation Act soon. She added that while the Centre would continue owning some banks, in the banks which it does decide to exit, it could do so completely.

While there has been no official confirmation from the government, Central Bank of India and Indian Overseas Bank are said to be the candidates for privatisation. 

On the compensation to states after the recent GST Council meeting, the FM said that the government was “conscious” of Covid-affected revenue growth. And those two years cannot be taken to measure any kind of growth percentage. But she said that the government is yet to take a call on rate rejig.

Cost overruns and delays are perennial problems that hamper infrastructure projects in India. With its ambitious capex plans hanging in the balance, will the government be able to overcome such challenges and spur the economy on?