Sitharaman said both the government and the central bank had learnt their lessons about not leaving any loose ends. They are more in sync and closely monitoring the situation, she said at the ET Awards on Saturday.
“The way in which it appears, now because there’s a greater sync between the RBI and the government, we are keeping a good watch and I don’t think India faces that risk of taper tantrum repeating now,” she said in response to questions about a reoccurrence.
In 2013, US yields soared after the Federal Reserve said it would unwind its quantitative easing programme. That led to money leaving emerging markets such as India and forced central banks to raise interest rates. Rising bond yields in the US have fanned fears that the Biden administration’s $1.9 trillion stimulus package might lead to inflation. The concern is that this could lead to another taper tantrum-like situation.
Global rating agency S&P said earlier this week that while Asian economies are better prepared, countries like India and the Philippines are “the most vulnerable at the current juncture”.
Sitharaman said the economy’s revival is better than anticipated, so rating agencies are revising their growth rates for India. “Today, the global growth path is positive and within that India’s growth patch is a notch higher,” she said.
This was based on a clear recovery in the services sector as specified by the Reserve Bank of India in its monthly review, apart from high-frequency indicators such as goods and services tax (GST), e-way bills, and the purchasing managers’ index (PMI) for manufacturing and services.
“There is restless urgency in the air in India to resume high growth,” Sitharaman said, quoting the RBI report, adding that the government was confident about the revival of the services sector, which contributes 50% or more to India’s GDP.
“We need to recognise the fact that India’s growth is definitely on the higher growth benchmark and also that it is sustained,” she said.
India’s move towards Aatmanirbharta or self-reliance was not intended to stop imports or mark a return to the socialist era. It’s meant to make India a competitive manufacturing hub in the global supply chain.
“It’s not going back to socialist India — we want imports to come in,” she said in response to a question on creeping import substitution through the Aatmanirbhar Bharat Abhiyan.
The government has therefore been selective about the items on which tariffs have been raised. These were essentially finished consumer goods that are manufactured in India and not on intermediaries and raw materials.
With regard to high oil prices and their effect on inflation, Sitharaman said the petroleum ministry was looking out for alternative sources of crude.
The Centre and the states will have to discuss fuel prices as both levy taxes and earn revenue from them. “I think overall we have to look at the consumer, and not just the consumer but also the ripple effect it can have on the economy itself,” she said.
On food-related inflation, Sitharaman said the empowered group of ministers on essential services, goods and commodities meets often and makes sure that supply distortions because of crop patterns or output are all managed well.
Sitharaman acknowledged that the rise in Covid-19 cases was a concern but the government is on top of the situation.
“We recognise the fact that this resurgence of Covid cases will be a matter worrying all our minds, not just the government but also the industry,” she said.
Inoculation is being ramped up from the supply and execution point of view, she said.
“So, with further such focused efforts, I hope that the concern with the upsurge in the incidence of Covid will be addressed,” she said. “And because that immediate response from the government is seen and we would like to continue that monitoring, I think we will be able to address the concerns about the spike in the Covid cases.”
The finance minister said public sector enterprises (PSEs) are being privatised to make them more efficient, to give them access to capital and ensure that taxpayer money is used wisely.
“My privatisation is not something which is going to end up selling for closure. No, I’m selling for the business to continue,” she said. She added that the rights of workers and all the commitments made to them by the government will be upheld. India’s private sector will get an opportunity to revive state-owned units through privatisation as part of the PSE policy announced by the government, Sitharaman said. “Professionals managing is better and such money is coming in, which becomes more and more sharply accountable,” she said.
She added that the privatisation measures in the budget along with the Aatmanirbhar Bharat Abhiyan packages and infusion of greater capital expenditure in infrastructure will create the much-needed multiplier effect for the economy.
Sitharaman said the government is yet to take a decision on whether to extend the suspension of the Insolvency and Bankruptcy Code (IBC), which ends March 25.
“We also want to make sure that injury or any kind of withdrawing of steps don’t hurt the industry, yet we need to get back to normalcy,” the minister said. The finance minister, who was guest of honour at the ET Awards, said that lesser-known aspects of the budget should be talked about more. These include `1 lakh crore to improve agricultural infrastructure and decriminalisation of the Companies Act, which will unclog the National Company Law Tribunal (NCLT).
She sought greater engagement from industry on the mining policy in the coal sector. It gives the private sector a chance to explore minerals and mines through a revenue-sharing model and offers a rebate on industries speeding up production.
Sitharaman highlighted government initiatives such as increasing the foreign direct investment (FDI) limit in insurance and defence production. She invited industry participation and discussion on how to make India a global hub for maintenance and repair of aircraft–an investment opportunity worth Rs 50,000 crore.