Prudent fiscal management has created room for RBI to cut rates: Finance minister
NEW DELHI: Finance minister Nirmala Sitharaman on Monday said the government's prudent fiscal management over the last decade has created room for the RBI to cut rates and allow the Centre to offer targeted support to affected sectors.
"It is also important to note that a good public finance policy improves the counter-cyclical capacity of fiscal policy - especially the ability to 'lean against the wind' in economic downturn . Today, many countries with high debt and large deficits have no room to manoeuvre, and they face a grim choice between austerity and instability. On the contrary, India has fiscal space - room to maintain our capex programme, room for RBI to cut rates, room to offer targeted support to affected sectors," she said at NIPFP, which is celebrating its golden jubilee.
The comments come amid demands for support from the government to offset the impact of the West Asia crisis . The monetary policy committee, which began its meeting on Monday, is expected to leave rates unchanged. "This current year is even more challenging as we move from a landscape of 'shocks' to one of 'permanent volatility'. The escalation of the Middle East (West Asia) conflict has evolved from a regional security concern into a systemic tremor, threatening the vital arteries of global energy and hardening the lines of a new, multipolar world order," the minister said.
Responding to a question, she said the government has developed an emergency response mechanism, which has helped it respond to crises since Covid. She said that during the current crisis, the government has to respond to higher gas prices, and there is uncertainty that has to be tackled. Citing the instance of importing fertiliser for the winter crop, the finance minister said that even suppliers are unclear, given the insurance and logistics disruptions. "There are so many ifs, I have apportioned Rs 1 lakh crore for exigencies, unless you put out the tender now, these are the exigencies that are not in my hands," Sitharaman said.
Government is expected to see pressure on the budgeted level of expenditure, given that oil prices have soared after the conflict began on February 28 and also affected other sectors. In the case of a prolonged war, economists are projecting an impact on overall growth and inflation. For now, the finance minister said that India remained the fastest-growing major economy. Replying to another question, she said that the government had taken a conscious call to support senior citizens and others who park their money in small savings schemes.
"It is also important to note that a good public finance policy improves the counter-cyclical capacity of fiscal policy - especially the ability to 'lean against the wind' in economic downturn . Today, many countries with high debt and large deficits have no room to manoeuvre, and they face a grim choice between austerity and instability. On the contrary, India has fiscal space - room to maintain our capex programme, room for RBI to cut rates, room to offer targeted support to affected sectors," she said at NIPFP, which is celebrating its golden jubilee.
The comments come amid demands for support from the government to offset the impact of the West Asia crisis . The monetary policy committee, which began its meeting on Monday, is expected to leave rates unchanged. "This current year is even more challenging as we move from a landscape of 'shocks' to one of 'permanent volatility'. The escalation of the Middle East (West Asia) conflict has evolved from a regional security concern into a systemic tremor, threatening the vital arteries of global energy and hardening the lines of a new, multipolar world order," the minister said.
Responding to a question, she said the government has developed an emergency response mechanism, which has helped it respond to crises since Covid. She said that during the current crisis, the government has to respond to higher gas prices, and there is uncertainty that has to be tackled. Citing the instance of importing fertiliser for the winter crop, the finance minister said that even suppliers are unclear, given the insurance and logistics disruptions. "There are so many ifs, I have apportioned Rs 1 lakh crore for exigencies, unless you put out the tender now, these are the exigencies that are not in my hands," Sitharaman said.
Government is expected to see pressure on the budgeted level of expenditure, given that oil prices have soared after the conflict began on February 28 and also affected other sectors. In the case of a prolonged war, economists are projecting an impact on overall growth and inflation. For now, the finance minister said that India remained the fastest-growing major economy. Replying to another question, she said that the government had taken a conscious call to support senior citizens and others who park their money in small savings schemes.
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