Not being risk averse in the face of COVID-19, says Sitharaman

Finance Minister Nirmala Sitharaman has said she is not being “risk averse” in coping with the economic impact of the COVID-19 pandemic and the 68-day lockdown imposed to slow its spread.

That period saw India’s economy come to a near-complete halt for part of the first quarter of 2020-21.

She said she has no option but to increase government spending. “After all, among the four engines that support the economy, three have come to a complete standstill. It is public expenditure which has to do the heavy lifting.”

The government’s borrowing calendar that has already been introduced signifies as a lot, Sitharaman said. The government has already raised its gross marketplace borrowing goal for the 12 months to Rs 12 lakh crore. Debt marketplace analysts are expecting an extra build-up on this to Rs13 lakh crore.

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The government’s relief package announced in May has been criticized for not having an adequate direct fiscal stimulus component and not doing enough to spur demand.

In an interview, the Finance Minister said she believes the economy does enough for both supply and demand. Still, she said, she has been receiving feedback on the need for one more stimulus.

“One more may be needed is what we are hearing from the people who interact with us, and we are trying to see what it is that we can do.” Sitharaman said. “There’s no point in me hurriedly getting something out.”

She also refused to get into a guessing game on this year’s GDP figures. Sitharaman said that while the decline in GDP in the first quarter of 2020-21, at 23.9%, has been substantial, she does not want to conclude anything about the entire year’s number. She said she expects the second and third quarter of the financial year to be better.

Most analysts expect the country’s GDP to shrink by at least 5% and as much as 10% in 2020-21.

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But things are getting better, the minister said, referring to conversations she has had with some industry representatives. Numbers bear out some of that. The latest value of the Nomura India Business Resumption Index was 82.3 on September 20, where 100 is the pre-pandemic level of business. The index has been steadily inching upward.

“The revival is also happening in many labour intensive areas. This is also corroborated by the fact that migrant workers from many states have started going back to their places of work,” Sitharaman said.

The minister singled out the agricultural sector (which grew 3.4% in the first quarter) as a symbol of resilience and talked up the farm reform laws passed by the government last week, even as she criticised the Opposition, and especially the Congress, for opposing them.

She said she is hopeful that coronavirus will recede, and the Indian entrepreneur, small big, medium, will succeed.” But she said Ladakh, where the Indian and Chinese armies are in a face-off following transgressions by the latter “is one imponderable”.