HTLS 2021: We’re largely back to pre-Covid growth, says FM Sitharaman
Finance minister Nirmala Sitharaman on Saturday expressed confidence in the robustness of the Indian economy, pointing out that 19 out of 22 high-frequency indicators have returned to or surpassed pre-pandemic levels.
Speaking at the Hindustan Times Leadership Summit, she said the government is cautious about the Omicron variant, but with rapid vaccination and strong Covid-19 protocols, it is confident about sustained growth momentum. “I’m still very hopeful that this year’s GDP (gross domestic product) numbers would be very encouraging, and we’d still be the fastest growing economy in the world,” the finance minister said.
The Indian economy grew 8.4% in the September quarter, comfortably exceeding estimates.
“At the macro level, we have managed to put the effects of the pandemic behind us and are now on a steadier path of growth,” Sitharaman said, citing the 22 high-frequency indicators.
“In 19 of them we’ve achieved pre-pandemic or even crossed pre-pandemic levels, meaning we have performed better than pre-pandemic levels. About three of them have problems because of the nature of that particular sector,” she said, referring to sectors such as tourism that was hit hard due to travel restrictions to check the spread of Covid-19.
Her reference is to indicators that come with a higher frequency than a quarter, such as monthly purchasing managers indices (PMI), car sales and factory output.
The finance minister said data is consistently showing Indian economy is growing. “PMI index is the highest in the last 10 months... There is a consistency to this performance and, therefore, I would think ... having reached the pre-pandemic level is one thing. Having crossed the pre-pandemic levels is the next.”
The recent IHS Markit India Purchasing Managers’ Index for manufacturing was 57.6 in November, the strongest expansion for the sector in 10 months. PMI for services has been also robust even as it is eased marginally to 58.1 in November compared to 58.4 in October. A PMI value above 50 signifies economic expansion.
“Tenacity and perseverance shown by the Indian people are actually resulting in this growth,” Sitharaman said.
Responding to a question on the International Monetary Fund (IMF) in October, trimming India’s potential growth to 6% due to the impact of the pandemic, the finance minister said the actual number can be more than that. “Of course, that will have to be enabled through several steps that the government has to keep taking,” she said. To be sure, IMF’s estimate was about long-term growth potential, not this year’s growth, or next. This is the growth rate that an economy can achieve without becoming overheated.
IMF estimates that India will grow by 9.5% in 2021 and 8.5% in 2022.
Facilitating simpler compliance, focusing on the ease of doing business, and consistency and certainty in the tax regime are among the measures that would help, she specified.
The finance minister declined to answer a direct question on the nature of the government’s policy on cryptocurrencies and their regulation. She did, however, admit that there was “certainly” a lot of speculation happening on private cryptocurrencies and it was unhealthy.
Commenting on India’s promises at the COP 26 climate conference in Glasgow, Sitharaman said that while the move towards less carbon-intensive growth will not in any way affect India’s growth prospects in the short term, in the long term, the country will have to invest more to fuel growth – an argument that backs India’s demand for climate finance funding from developed countries.
On a question “how can we further strengthen cooperative federalism, especially given how polarised the present political scenario is”, Sitharaman recalled the example of the Goods and Services Tax (GST) Council, where decisions are taken unanimously.
“Let’s say, the GST Council. There’s no polarisation there. Matter of fact, it’s a classic example of how federalism can work. There can be a lot of discussion. Sometimes we agree, sometimes we don’t, but eventually solutions have been arrived at with majority of us going through and some of us... with a bit of a reservation, but yet going through it. So, polarisation doesn’t come into this institution. And I’m glad for it. And, therefore, this polarisation being the cause for everything that you want to say, is also not right,” she said.
The GST Council is the apex decision-making body of the indirect tax regime, which is chaired by the Union finance minister and finance ministers of states are its members. Barring one instance related to GST on lottery, its decisions have been unanimous since its inception in July 2017.