FM Sitharaman assures India will spend money, not worry about widening fiscal deficit

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December 8, 2020 11:05 AM

“For the present, I’m not going to allow the fiscal deficit number to worry me because there is a need, and a clear need, for me to spend the money,” Sitharaman said.

The stimulus steps were already helping fuel a recovery in Asia’s third-largest economy, she said. (File photo: PTI)

India will not worry about missing its budget deficit target as it seeks to step up spending to support the economy, Finance Minister Nirmala Sitharaman said. The stimulus spending won’t be wound down in a hurry, she said in an interview to Bloomberg TV. Also, the government will ensure that state-owned enterprises continue with capital expenditure.

“For the present, I’m not going to allow the fiscal deficit number to worry me because there is a need, and a clear need, for me to spend the money,” Sitharaman said.

Last month, India expanded stimulus measures to 15% of the economy to rescue companies and save jobs lost due to the coronavirus pandemic. That could widen the budget gap to 8% of the gross domestic product in the year to March, more the double the targeted 3.5%.

“As regards the coming year, we need to do an assessment,” she said ahead of the next fiscal year’s budget due Feb. 1. “I’m not sure that I can immediately curtail expenditure. It will have to be a careful balance because the momentum that the economy gains should be sustained.”

The S&P BSE Sensex added to early gains, advancing 0.5% to 45,677 as of 9:56 a.m. in Mumbai.

The stimulus steps were already helping fuel a recovery in Asia’s third-largest economy, she said.

India’s GDP shrank a less-than-expected 7.5% in the three months ended September, a marked improvement from the June quarter’s record 24% contraction. A slew of high-frequency indicators also suggests a gradual recovery in activity across services and manufacturing sectors — the key engines of the economy, which is now in a recession.

That prompted the Reserve Bank of India this month to revise its annual outlook for the economy to a milder 7.5% contraction compared with a 9.5% drop seen in October.

Both the International Monetary Fund and “the central bank have very clearly seen good recovery happening,” Sitharaman said. “A sustained good positive recovery is what I see from the beginning of the next fiscal.”

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