Finance Minister Nirmala Sitharaman on Friday promised more stimulus measures for sectors of the economy in distress as she counted on steps taken till now to boost growth by driving up consumption. She also said the Centre is aware of the pending GST compensation to states and will honour its commitment. Addressing a press conference on the state of the economy along with senior officials, Sitharaman said the government will continue to take measures as and when required to boost growth.
Asked by when she expects the economy to revive, she said, “I’m not engaging in any prediction-based thing. I am looking at the economy, where I need to intervene, I am intervening, and I shall continue to address the problem of the industry as and when it rises.”
She declined to comment on the narrative of stagflation—high inflation coupled with declining growth. “No comment on that. I have heard it. Stagflation is a narrative which is going on. I am hearing it,” she said.
Rising food prices pushed retail inflation in November to an over three-year high of 5.54 per cent, while industrial sector output shrank for the third month in a row by 3.8 per cent in October, indicating deepening slowdown in the economy, government data showed on Thursday.
Many economists, including former RBI Governor Raghuram Rajan, have expressed fear of India getting into stagflation mode.
India’s economic growth slowed to a 6-year low of 4.5 per cent in the July-September quarter. With inflation rising, fears of stagflation—a fall in aggregate demand accompanied by rising inflation—have resurfaced.
Ahead of the crucial meeting of the GST Council, Sitharaman also said the buzz of an increase in GST rates is everywhere other than her office.
She was responding to a question on talk of current Goods and Services Tax (GST) rates of 5, 12, 18 and 28 per cent being raised to make up for the fall in revenues that has even hampered giving compensation to states for loss of revenue from implementation of the indirect tax regime.
“Buzz is everywhere other than my office,” she remarked.
Sitharaman, however, did not rule out a hike in GST rates, saying her ministry is yet to apply its mind to it. She further said there is no denying the fact that GST compensation is pending to all states.
“I’m also say that it is an article of faith and we should keep up what has been coming to in terms of giving compensation to states,” she said.
On the rising onion prices, the finance minister said prices in some places are coming down with imports of the commodity. With fresh crop coming in the market, the prices will further decline, she said, adding a Group of Ministers (GoM) is regularly reviewing onion prices.
On the quantum of revenue shortfall during the current fiscal, Revenue Secretary Ajay Bhushan Pandey said tax collection data is out till November and the advance tax numbers after December 15 will give fairly good estimate of the tax mop-up.
Some realistic estimate will be known after advance tax collection figures are out, he said. While making a detailed presentation on the state of economy, Chief Economic Adviser KV Subramanian said various measures have been taken since August to boost economy. These include moderation in interest rate and infusion of liquidity through various means.
Also, capitalisation of public sector banks and giving last-mile funding to realty projects was announced. Subramanian said following RBI guidelines mandating banks to link their lending rates to external benchmarks, all public sector lenders have introduced repo rate linked loan products and 8.18 lakh repo linked loans amounting to Rs 72,201 crore were sanctioned till November 27, 2019.
Besides, through MSME bill discounting, about 5 lakh bills worth Rs 12,698 crore were traded till November 15. As part of the government’s initiative to clean up the banking system, he said a transparent one-time settlement policy was adopted.