Will give necessary stimulus to economy, along with RBI: FM | The Financial Express

Will give necessary stimulus to economy, along with RBI: FM

The economy will likely see slower growth in the current quarter and the coming few quarters, due to a waning of the base effect and a slowing of exports.

Will give necessary stimulus to economy, along with RBI: FM
Fearing political opposition, the government has not yet listed a Bill to facilitate the privatisation of two public-sector banks. (Image: IE)

The government and the Reserve Bank of India (RBI) will together extend necessary stimulus to maintain economic growth momentum, even as the Centre strives to maintain fiscal rectitude, Finance Minister Nirmala Sitharaman said on Monday.

Speaking at an event of Elara Capital, Sitharaman also said the government is committed to the announced plan for bank privatisation. Justifying windfall taxes on abnormal profits by oil companies, she said the taxes were not an ad hoc measure.
Helped by a favourable base and some sequential momentum in services, agriculture and utilities, India’s gross domestic product (GDP) grew by lower-than-expected rate of 13.5% in the June quarter of FY23.

The economy will likely see slower growth in the current quarter and the coming few quarters, due to a waning of the base effect and a slowing of exports.

“Together with a central bank, the ministry of finance will be working out a pathway, which will be predictable, consistent and give every stimulus required for the growth of the Indian economy,” Sitharaman said. She had earlier said that given the downside risks from external factors, it was not yet time to drop caution on the growth front.

The minister’s comments come close on the heels of RBI governor Shaktikanta Das’s statement last week that the central bank would focus on minimising the growth sacrifice resulting from the tightening of monetary policy. He said the RBI was studying the reasons for the deviation of Q1 GDP from its forecast of 16.2%.

Also Read | Banking system healthy enough to withstand external headwinds: RBI Governor Shaktikanta Das

With the ecosystem of certain segments of global industries now willing to shift out of countries like China, the Centre is working with the state governments to make sure that these are brought into India, Sitharaman said.

On taking forward the proposed bank privatisation, the minister said the listing of Life Insurance Corporation was an indication of the government’s commitment to reforms and disinvestment.

“So, we shall go ahead with the banking sector reform as well. We’ve mentioned it in the Budget (to privatise two banks). We shall take it forward,” the finance minister said.

Fearing political opposition, the government has not yet listed a Bill to facilitate the privatisation of two public-sector banks (PSBs).

On July 1, the Centre imposed special additional excise duty of 23,250/tonne on crude and export taxes on petrol, diesel and ATF at 6/litre, 13/litre and6/litre, respectively. The taxes are revised fortnightly depending on changes in margin and crude prices.
The government’s rationale for introducing these taxes is to lay its hands on a chunk of the “windfall profits” reaped by some of the domestic firms, on the back of elevated global oil prices. The move is also aimed at addressing the crunch in the domestic fuel market, as private refiners neglected supplies to domestic retail outlets while tapping the highly remunerative export markets.

Also read: India’s trade deficit eases in Aug, still unsustainably high, likely to raise financing concerns: Barclays

“Consultation happened every 15 days on the tax rate changes. So, the government is not interested in ad hocism. But the government also understands after consulting with industry, that the windfall gains were abnormal,” the minister said.
Talking about the fiscal prudence of states, the minister said the borrowing limits of states are very closely monitored by the Centre. “We are talking with them about out-of-budget borrowings. Off-budget borrowings are a matter of concern in some states, we’re talking to them.”

The Centre tightened the mandatory borrowing approval for many states to tap the market for issuing their state development loan papers, by enforcing a rule from FY23 that all off-budget liabilities would be counted as part of their annual net borrowing ceilings.

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