FM says Modi government kept inflation under control
Premium- Sitharaman says inflation touched double digits during the 2008 global financial crisis
NEW DELHI : Finance minister Nirmala Sitharman said on Thursday that the government has better managed the economy by keeping inflation under control despite the Covid pandemic, compared to the UPA regime when inflation touched double digits during the global financial crisis which had led to India being described as one of the fragile five economies.
The finance minister, in her response to the Budget discussion in Lok Sabha, said that GDP contraction of 6.6% during the pandemic in 2020-21 which came to loss of ₹9.57 lakh crore for the economy was far sharper than ₹2.12 lakh crore in GDP growth that was lost in 2008-09 global financial crises, yet the government was able to contain consumer price inflation (CPI) to within 6.2% as opposed to CPI ballooning to 9.1% during the global financial crisis.
“It is showing that we manage the economy much better now, than a smaller crisis of that time when the contraction was only ₹2.12 lakh crore," Sitharaman said. She added that the government was taking additional actions to keep consumer inflation under control by importing more edible oils, removing the restriction on import of pulses.
Taking on the Opposition, Sitharaman highlighted several macro-economic parameters such as record FDI inflows, positive current account balance and high forex reserves, that were better managed despite the pandemic, which have put the country on a sustained economic recovery path.
“Be it a developed economy or emerging economy, drop in growth was much sharper for us than these economies, but our pace of recovery is just as fast this year and coming years. We are recovering at the fastest pace and it is a sustained recovery," Sitharaman added.
Sitharaman further criticised the UPA, stating that during its rule state owned carriers BSNL and MTNL were made to bleed to the brink, but they have now been revived with a recovery package offered by the government.
“We’re giving ₹24,000 crore for 4G which is already 10 years late, which should have been given during their time... ₹69,000 crore financial support has been given," Sitharaman said.
Sitharaman on Thursday defended the Union Budget for FY23 saying the government reduced revenue deficit so that funds are better in the form of capital expenditure creating productive assets and at the same time leveraging its multiplier effect on the economy.
The Reserve Bank of India (RBI) estimated that if Re one is spent on revenue expenditure without creating assets, then its multiplier effect would be less than one, while in the case of infrastructure, the multiplier effect in the year of spending would be 2.45 and in the subsequent year, it would be 3.14, the minister explained in her reply to the budget discussion in Lok Sabha.
"Therefore, we thought public taxpayers money being spent in creating assets gives a better return and so we chose to spend on infrastructure building," the minister said.
Sitharaman questioned the opposition Congress Party on managing the economic impact of the 2008-09 global economic crisis, especially, the inflation that followed a stimulus package. Earlier this week, Congress party’s Shashi Tharoor said the budget had betrayed hopes and aspirations of the people, pointing to “unprecedented levels of unemployment" in the country. Congress Party members staged a walk out at the end of Sitharaman’s reply to the budget discussion.
Sitharaman highlighted the steps taken by the Modi administration to address the liquidity crisis faced by micro, small and medium enterprises. Sitharaman said that government heard MSMEs, and extended quite a few assistance measures including collateral free automatic loans.
The minister also referred to the Prime Minister’s Mudra Yojana, a loan scheme for MSMEs introduced in 2015, saying that 32.11 crore loans have been given with a sanctioned amount of ₹17 trillion. “This has created an additional employment of 1.2 crore between 2015 and 2018," Sitharaman said.
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