Zero probability of India getting into recession or stagflation: FM
India does not face any risk of either recession or stagflation as its macroeconomic fundamentals are “perfect”, Finance Minister Nirmala Sitharaman asserted in the Lok Sabha on Monday. In nearly two-hour long reply to a debate on price rise, she said India continues to be a fast-growing economy in the world quoting reports of global agencies.
Not satisfied with the reply, the opposition led by the Congress staged a walkout. Sitharaman said that India is doing better than its peers and “there is no question of India getting into recession or stagflation … there is no question of us getting into stagflation or like the US a technical recession.” The GDP of the US fell 0.9 per cent in the second quarter, following a 1.6 per cent decline in the first quarter, marking the start of what they call an unofficial recession.
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She further said, “A Bloomberg survey which was done by economists says there is zero probability of India slipping into recession, so it is not just me saying. There is zero probability of India slipping into recession even though there are several major economies who are in substantial risky position of getting into recession.” On the macroeconomic fundamentals of the country, the Finance Minister said that the country’s debt-to-GDP ratio is better than many developed nations, including Japan, and the GST collection has touched the second-highest since its rollout in July.
The GST collection rose 28 per cent to touch the second-highest level of Rs 1.49 lakh crore in July. GST, introduced in July 2017, touched a record high of Rs 1.68 lakh crore in April 2022. This is the sixth time that the monthly GST collection crossed the Rs 1.40-lakh-crore mark since the inception of Goods and Services Tax and the fifth month at a stretch since March 2022, she said.
Purchasing Managers’ Index (PMI) touched eight months high is an indication that the Indian economy is getting more robust, she said. Gross NPAs of scheduled commercial banks have reached a six-year low of 5.9 per cent, she said, adding that government debt to GDP ratio has come down to 56.29 per cent in FY22. Acknowledging that the country faces inflationary pressure, the Finance Minister said that the government has been able to contain it below 7 per cent despite problems like COVID-19 and Omicron.
Efforts are being made to bring down retail inflation below 7 per cent, the minister said. Prices of edible oils have corrected sharply following steps taken by the government, she added. During the UPA government she said, “Retail inflation was more than 9 per cent in 22 months and inflation crossed double digit 9 times during UPA regime time…We will bring inflation below 7 per cent and inflation is coming down below inflation 7 per cent.”
Sitharaman countered repeated opposition’s criticism that Modi government has increased GST on essential items, saying it was an unanimous decision of GST Council comprising of State Finance Minister and Union Finance Minister. A 5 per cent Goods and Services Tax (GST) was levied on essential food items including pre-packed curd, paneer, honey, wheat jaggery, puffed rice (muri), among others, effective July 18.
In addition, hotel rooms with tariff of up to Rs 1,000/day, maps and charts, including atlases, invited 12 per cent GST, while 18 per cent GST has been levied on tetra packs and fees charged by banks for the issue of cheques (loose or in book form). The decison was unanimous and there was no difference of opinion on raising rate, she said, adding it was done to plug leakages.
Referring to a letter written by a six-year old girl on costlier pencil and Maggi, she said the girl has faith in the Prime Minister that is why she has written to him. She has not written to anyone else as she believes that the Prime Minister can provide a solution, the finance minister said. The finance minister said that the GST compensation to states till May 2022 has been paid and only June month’s dues are pending.
With regard to issuance of Rs 1.48 lakh crore oil bonds by the UPA regime, Sitharaman said, it was principally wrong and the burden of interest payment and principal repayment were transferred to the future generation. “Taxpayers of today are paying for subsidy dished out to consumers more than a decade ago in the name of oil bonds. And they will continue to pay for the next five years as the redemption of bonds continues till 2026,” she said. On forex reserves, she said India has sufficient reserves and economic fundamentals are perfect.