Nirmala Sitharaman allays growth dip worries, moots rate cut

Union Finance Minister Nirmala Sitharaman addresses the 11th SBI Banking & Economics Conclave 2024 in Mumbai on November 18, 2024.
| Photo Credit: ANI

Seeking to quell anxieties about a slowdown in the economy, Union Finance Minister Nirmala Sitharaman on Monday asserted that the government was fully aware of domestic and global challenges and there was “no cause for undue concern”.

Ms. Sitharaman batted for lower interest rates to spur private investments while acknowledging that perishable vegetables continue to pose an inflation risk.

Acknowledging that there has been moderation in some economic indicators, Ms. Sitharaman, however, brushed them aside and said India’s economy remained resilient, underpinned by strong macroeconomic fundamentals, moderating inflation, robust external position, and continued fiscal consolidation that have reinforced confidence among both consumers and businesses.

“I need to address the concerns arising from recent signs of moderation in certain economic indicators. The concerns are there… Whilst I acknowledge the remarkable growth trajectory and promising prospects of the Indian economy, it is also important to address the concern… let me assure you that the government is fully aware of the challenges posed by domestic and global factors,” the Minister said at the SBI Banking and Economics Conclave.

The remarks assume significance in the light of slackening momentum in the economy, marked by faltering urban demand and weak corporate results for the second quarter that some economists have even posited as a “cyclical slowdown”.

“There is no cause for undue concern. Recent high frequency indicators also reflect sustained growth momentum. Record e-way bill generation, buoyant trends in rural demand, and strong PMI data for manufacturing and services underscore the steady pace of economic activity,” she said.

She also pointed to healthy growth in foreign direct investment inflows this year and foreign exchange reserves that “comfortably cover 11.8 months of imports and exceed 100% of external debt, underlining the strong net buffer in the Indian economy”.

“So let me assure you all that the government is closely monitoring an evolving situation. We remain committed to taking all necessary measures to ensure that India remains fully and firmly on course to become the third largest economy in the world,” she said.

While noting that stress on the inflation front is coming from three perishables — tomato, onion, and potato — Ms. Sitharaman said she did not want to wade into the debate on whether these should be excluded from the retail inflation measure, but that India periodically suffered from supply inadequacy of these commodities.

“We, as a government, are making a lot of efforts towards scientific and more rigorous storage facility for perishable commodities. So till you really get on the top of that issue, you will periodically have this problem causing immense stress in a cyclical fashion,” Ms. Sitharaman noted.

“Equally, I think what is important is when you look at India’s growth requirements and you have so many different voices coming out and saying the cost of borrowing is really very stressful. At a time when we want industries to ramp up and move, building capacities, our bank interest rates will have to be far more affordable. These are our requirements if we have to make Viksit Bharat not just an aspiration, but a reality. So we need to have a lot more conversation on this,” she said.