India’s Finance Minister Nirmala Sitharaman isn’t worried about missing the fiscal deficit target this year as the nation aims to increase spending and boost demand in an economy that’s left cratered by the coronavirus pandemic.
“I’m not going to allow the fiscal deficit number to worry me because there is a clear need to spend money to boost the economy and give demand the necessary push,” she said in an interview with Bloomberg TV on Tuesday. “For this fiscal, I shall keep giving stimulus and not worry about the number; have an open mind on who needs help.”
The assessment, according to Sitharaman, needs to be done for the next financial year, keeping in mind the need to continue spending while being cautious of the deficit target.
India’s fiscal deficit is nearly 120% of the annual budget estimate at the end of October of the current financial year. The nation last month expanded stimulus measures to 15% of the economy to rescue companies and save jobs in an economy clobbered by a sudden lockdown in March to contain the pandemic. That, according to a Bloomberg report, could widen the budget gap to 8% of GDP in the year to March, more than double the budgeted 3.5%.
Yet, high-frequency economic data improved, with several indicators now at or above pre-pandemic levels. Economists pointed at pent-up demand, a festive boost and a decline in fresh Covid-19 infections as reasons behind the spurt in activity.
The PMI data both for manufacturing and services, according to Sitharaman, are showing uptick since August. Investments in the core sector such as cement and steel are also coming through on the back of consistent persistent demand, she said. “This is going to be sustained into the next year.”
Other highlights from the interview:
On Economy
- Between the RBI and the Finance Ministry, have tried to do clear balance monetary and fiscal measures
- Liquidity was a problem before the coronavirus hit, and measures were the need of the hour
- Stimulus was tailored after hearing stakeholders, done in targeted way
- What’s been done for India’s economy seems to be working
- Sees India to be able to shirk off much of the baggage that fell on it in Q1
- Sustained recovery seen from 1Q of FY22
- Festive season not exactly over; to last till January with local festivities
- Seeing tier 2 and 3 driving demand that will gradually trickle over to the cities
- Need to ensure that Rs 4-lakh-crore PSU capex plan for FY21 flows through
On Banking
- Want the banking sector to be professional in the way they are run
- Indian needs more robust and buoyant banking mechanism. That was the rationale behind merging smaller banks with big banks
- LVB-DBS deal sends signal that India is open for healthy banking system
- Discussion on corporates in banking not a new one in India
India Vaccine plan
- India will keep all resources required for vaccines and cold chains ready
- Not able to currently reveal the budget for vaccine
- Cannot commit to exact spend on vaccine right now, will do whatever is required
- Engaging with chief ministers on vaccine plan
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