India's growth rate to be around 7% this fiscal: Nirmala in US

Amidst reports of a global recession and downgrading of growth rates of almost all major economies including India, Finance Minister Nirmala Sitharaman on Tuesday exuded confidence in India’s relative and absolute growth performance in the rest of the decade and forecast the country’s growth rate to be around 7 per cent this financial year.

The finance minister is visiting Washington DC to attend the annual meeting of the International Monetary Fund and the World Bank. Addressing a think tank in Washington, she said the Indian economy is making steady recovery post COVID, foundation of which was laid when Prime Minister Narendra Modi took office in 2014.

“I am aware that growth forecasts around the world are being revised lower. We expect India’s growth rate to be around 7 per cent this financial year. More importantly, I am confident of India’s relative and absolute growth performance in the rest of the decade,” she said.

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She, however, admitted that India nonetheless is likely to be affected by global trends.

“After the unprecedented shock of the pandemic, came the conflict in Europe with its implications for energy, fertiliser and food prices. Now, synchronised global monetary policy is tightening in its wake. So, naturally, growth projections have been revised lower for many countries, including India. This triple shock has made growth and inflation a double-edged sword,” Sitharaman said.

She, however, assured that India has carved out its growth trajectory supported by the above-normal south-west monsoon, public investment, improvement in capacity utilisation, a broad-based revival in credit growth, strong corporate balance sheets, upbeat consumer and business confidence and receding threat of the pandemic.

‘Next budget needs careful structuring’

To ensure that the country sustains its growth momentum, the next annual budget of India has to be carefully structured, Sitharaman said.

She was responding to a question on India’s next budget in a fireside chat with eminent economist Eshwar Prasad at the prestigious Brookings Institute.

“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,” Sitharaman said.

India’s next annual budget is scheduled to be presented by Sitharaman before the Parliament next February and preparations for it are likely to begin in December.

“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 the next year, even as per the many many multilateral institutions which are observing India cannot be weakened,” she said. ‘So, it will have to again be a very carefully structured budget in which growth momentum will have to be sustained,” Sitharaman said.

Responding to a question, the minister said the “global stress that hits India – the energy, fertiliser or food – all of this we are carefully watchful, and making sure that stress doesn’t get passed on to the people,” she said. “That is why once before the probably last year and once in early June this year, 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 were making sure that those of the vulnerable sections don’t get hurt. Giving food another,” she said.

Empowering is the principle rather than entitlement, Sitharaman said in response to another question. So, the principle of entitlement vs empowerment is what is governing us when we deal with schemes which will touch the vulnerable sections, she said.

‘India helming G-20 at challenging times’

Speaking about the G-20, Sitharaman said the group of 20 economies have a great potential to work towards global goods.

“When I say public goods, will also have to be made far more strengthened. India stack, for instance, can become a global stack. Efficient cross-border payments and cheaper remittances are all the benefits which we can derive out of it,” Sitharaman said.

Observing that India is taking the G-20 presidency from Indonesia at challenging times, Sitharaman said India has been working very closely together with the membership. “The time demands that we work to achieve some of these outcomes. Multilateral institutions need to be strengthened. Their capacity to deal with a pandemic or any future such stressful global developments will have to be bettered,” she said.

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“We need to have the finance to deal with any future pandemic or disaster. Climate-related disasters are now becoming far more frequent than we could imagine. Resilient infrastructures are required. Do we know how we can handle cloud bursts or sinking islands and so on? Climate finances must be something which is smooth. A lot of talks have happened, but really has not seen the light of day,” Sitharaman said.

“We have issues, which are one of the legacy issues which are coming from various different presidencies, some of which will have to be carried further. But I think multilateral institutions and their strengths will have to be talked about,” she said. “It’s just not a coincidence that the earlier presidency, India’s presidency and the one next will all be emerging from the emerging markets. So their voice, their priorities will also have to find some kind of traction. I would also think it’s important for global issues to be sorted out and institutions should be robust to give solutions,” she said.

US Treasury Secy to visit India on November 11

During a meeting with her American counterpart, Treasury Secretary Janet Yellen, Sitharaman discussed a slew of issues, including bilateral relationships, the global situation as well as India’s upcoming G-20 Presidency.

“The two leaders discussed the current global macroeconomic situation among other issues of mutual interest,” the Finance Ministry said after the meeting.

Sitharaman has invited Yellen to India to attend the US-India Economic and Financial Partnership meeting in New Delhi on November 11. This will be her first visit to India as Treasury Secretary.

(With inputs from agencies)