Government, RBI Will Push Growth, Says Sitharaman

Finance Minister Nirmala Sitharaman said growth will be given priority even as the government will do everything to contain inflation.

"Growth will have its priorities, growth will be given importance and growth will be pushed both by the Reserve Bank and by us (Ministry of Finance)," Sitharaman said on Thursday at an event organised by the Confederation of Indian Industry.

It's not "growth versus inflation for us", Sitharaman said. And inflation has been well within RBI's mandated range in the last seven years except for seasonal ups and downs, she said.

After exceeding the Monetary Policy Committee's target of 4 (+/-2)% in May and June, Consumer Price Index inflation eased back to the target band at 5.59% in July compared with 6.26% in June.

The government will take all necessary steps to contain inflation, Sitharaman said. But growth is what will make all the difference to economic revival, she said. "Growth is what is eventually going to remove poverty and bring a level playing field for all Indian citizens."

While the government has announced measure to help the economy recover from the impact of the pandemic, the RBI has injected record liquidity into the system.

India has not yet reached the level where the surplus liquidity support can be withdrawn, Sitharaman said. "I am glad that the RBI has been voicing that understanding that too quick a retrieval or sucking out of liquidity from the economy may not be the necessary stimulus that is required and have not given any indication of sucking out the liquidity that is available."

Key Highlights From Sitharaman's Speech:

Growth Push

• Indicators are clear that economy is buoyant and can aspire for more.

• Growth in core sectors was largely due to push for government capital expenditure.

• This year, in the first five months, FDI inflows seen a jump of 37% year on year.

• Foreign exchange reserves are at $620 billion as of July.

• Since September-October 2019, nearly Rs 5 lakh crore has been provided via various credit outreach programmes.

• Net exports, public investments and spend on infra is growing.

• Consumption has been given all the boost it requires.

• Indians are more open now to invest in stock markets.

• Per month, three lakh demat accounts were opened last year as well as this year.

• Since last year, money has been put where it matters--infrastructure, healthcare, vaccines; will continue to invest for a sustainable economic recovery.

• RBI's MPC has been keeping the momentum in the right direction. The fiscal side is being taken care of by FMnance ministry.

• The coordination between RBI, finance ministry continues.

Retro Tax

• Once the arbitration verdicts came out, the government was ready with the bill to end retrospective tax; was always in agreement with industry on retrospective tax.

• We carried out and continued with reforms despite the pandemic.

Divestment, Asset Monetisation

• Commitment to divestment and privatisation firmly ingrained in the new PSU policy. Will push to conclude Air India, BPCL, Concor sale in FY22.

• Committed to disinvestments announced in the budget.

• Government is also looking at asset monetisation.

• Carving out largely land-based assets from CPSEs in various parts of the for monetisation.

• These assets will be available for industry that want such infra facility.

Taxes, Fiscal Deficit

• GST compensation will be paid to all states in time this year as revenues are buoyant.

  Giving a clean trajectory to show how we shall bring the fiscal deficit down.

• We shall bring back the fiscal deficit as per trajectory mentioned in budget.

Message To Industry

• Corporate taxes at its lowest; time for Indian industry to show risk-taking abilities.

  Best time for Indian industry to ensure investments shifts to India.

• Covid has not been financed by taxation. Nor has the industry been taxed to manage the pandemic.

• Want India to be Atmanirbhar on renewable energy to reduce dependence on fossil fuels.

• Want Industry to be proactive and build capacities on renewable energy.

• We should be able to produce raw materials for renewable energy in India.

• Need to have chip manufacturing in India.

• Need self-reliance in energy sectors.