India’s carefully measured stimulus packages helped in keeping inflation under control while accelerating economic growth in contrast to the huge demand-side largesse of some advanced economies that escalated prices of essential commodities to multi-year highs, finance minister Nirmala Sitharaman said in Parliament on Friday, citing examples of the US and Germany.
Replying to questions on inflation during the Budget discussion in the Rajya Sabha, Sitharaman said: “US inflation, reported in all [news] papers today, has hit 40 years’ highest. US inflation, cash transfers were made, huge stimulus packages were given… this is the effect,” she said while displaying the news item in the House. Germany is also facing high inflation, which it had not faced since 1992, she added.
The US Labor Department said on Thursday the consumer price index (CPI) climbed 7.5% over the 12 months to January, its largest increase since February 1982 as costs spiked for a wide range of items, HT reported quoting AFP on Friday.
Linking the inflation challenges faced by the advanced economies due to huge direct demand stimuli that eventually caused more hardships to the poor, Sitharaman said there are countries that spent big money to revive the economy from the devastating impact of Covid, but India took a careful approach of “jaan bhi, jahan bhi” [lives and livelihood].
In order to save lives of the poor and stimulate the pandemic-hit economy, Sitharaman announced a series of measures in a staggered manner from March 2020 totalling ₹29.87 lakh crore, which also included monetary initiatives of the Reserve Bank of India (RBI). Compared to that, Germany and the US announced formidable packages, including tax cuts, direct relief to the people, rescuing their respective economies and measures to control the virus.
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{{/usCountry}}“Advanced economies relied on large stimuli, almost entirely on the demand-side measures they relied on direct support without attention to… [inflation]. It is their prerogative, they can do it. Their outcome today is high inflation,” she said.
According to the RBI, India’s inflation projection is well within the tolerance limit. The RBI on Thursday retained inflation projection for 2021-22 at 5.3%, with Q4 at 5.7% on account of an unfavourable base effect. “Taking all these factors into consideration and on the assumption of a normal monsoon, CPI inflation for 2022-23 is projected at 4.5 per cent with Q1 2022-23 at 4.9 per cent; Q2 at 5.0 per cent; Q3 at 4.0 per cent; and Q4 at 4.2 per cent, with risks broadly balanced,” RBI governor Shaktikanta Das said after a meeting of the monetary policy committee. The official prescribed limit for CPI inflation is 4% (plus/minus 2%).
Reacting to Opposition members’, including former finance minister P Chidambaram’s, criticism that the she did not say anything about the poor, but spoke more about the Prime Minister, Sitharaman said: “Of course, I feel very proud. I feel honoured to be in the ministry along with the other ministers who are guided by the Prime Minister... who is a visionary… But [in] our country there are some people who suffer from serial hatred of the Prime Minister, but that’s their problem.”
While maintaining that the Budget aims to boost inclusive growth and create jobs, she questioned Congress members whether they were referring to poverty as defined by their former president. Without naming anyone, she quoted, “Poverty does not mean scarcity of food, money or material things. If one possesses self-confidence then one can overcome it, said the Congress leader.”
“He also said it [poverty] is a state of mind… I’ve not named the person but we know who it is,” she said. She was taking a dig at Rahul Gandhi’s 2013 remark. “Please be clear, is this the poverty that you wanted me to address, the poverty of the mind?” she said.
When Shiv Sena MP Priyanka Chaturvedi protested that the FM was mocking the poor, Sitharaman said, “I am not mocking the poor people. The person who had mocked the poor people, you are in alliance with his party.”
Sitharaman also took exception to Congress leader Kapil Sibal’s remark that India is not in ‘Amrit Kaal’ but in ‘Rahu Kaal’ since 2014. She said, “If I heard him right… ‘Rahu Kaal’ was that period when an ordinance issued by the then Prime Minister was torn in front of the media by one of his own party members, that too when the PM had a meeting with the US President.”
She was referring to a 2013 incident at the Press Club involving Rahul Gandhi. She said ‘Rahu Kaal’ is the implosion of “G-23”, referring to a grouping of 23 Congress leaders that also includes Sibal. The group had raised some issues related to the functioning of the party.