Union Finance Minister Nirmala Sitharaman outside Parliament on Tuesday. (Express photo by Prem Nath Pandey)
Citing seven indicators as signs of green shoots in the economy, Finance Minister Nirmala Sitharaman said the economy is not in trouble and the economy is moving forward with the measures being taken by the government.
Detailing the green shoots, Sitharaman said global sentiment in favour of India, net positive foreign portfolio investment, national infrastructure pipeline, growth in Index of Industrial Production, Purchasing Managers’ Index, forex reserves, gross GST revenue collection over Rs 1 lakh crore during last three months and upbeat secondary markets are supporting growth, adding that the government is constantly in touch with industry, MSMEs and other stakeholders.
“There are seven important indicators which show that there are green shoots in the economy...economy is not in trouble,” she said while replying to a debate on the Union Budget in Lok Sabha.
The Finance Minister further said the recent steps announced by the Reserve Bank of India (RBI) are important and the proposed Remission of Duties or Taxes on Export Product (RoDTEP) scheme, which will replace the existing Merchandise from India Scheme (MEIS), will provide incentives for exporters.
“I am glad to say that in the recent announcement, the RBI not just looked at monetary policy as an instrument because monetary policy has its own limitations ... the marginal or the incremental benefit that we are getting from monetary policy is now plateauing and therefore our central bank, much to the credit, I would like to recognise this fact, has come out with very creative solutions so that the economy is driven towards growth,” she said.
Holding the key policy rate unchanged in its monetary policy meet on February 6, the RBI announced a cash reserve ratio (CRR) exemption on incremental retail loans in the automobile, housing and the MSME sectors until July 31, 2020. It also decided to introduce long-term repo operations to facilitate the transmission of monetary policy actions and flow of credit to the economy.
The minister said textiles and all other sectors, which currently enjoy incentives up to 2 per cent over MEIS, will transit to RoDTEP. “In effect, RoDTEP will more than adequately incentivise exporters than the existing schemes all put together,” Sitharaman said, adding RoDTEP “will more than adequately compensate and incentivise exporters than all the existing schemes put together.”
Sitharaman said the global sentiment is favourable as foreign investors continued to show confidence in India. There was net FDI of $24.4 billion in April-November 2019-20 as compared to $21.2 billion in the previous year, she said. The finance minister said the forex reserves are at an all-time high and the stock market is upbeat, adding that the government’s focus is on four engines of growth which include private investment, exports, private and public consumption.
With regard to public investment, she said, the government in December announced a National Infrastructure Pipeline which proposes investment of Rs 103 lakh crore for infrastructure development across the country in the next four years (till 2024-25). To boost consumption, the government has increased the Minimum Support Price of all mandated rabi and kharif crops for 2019-20.
She further said the fiscal deficit was higher during the UPA regime “when the economy was managed by competent doctors”. The minister was referring to remarks of former finance Minister P Chidambaram on Monday that the “economy was perilously close to collapse and was being attended by incompetent doctors.”
In her reply in Rajya Sabha later in the day, she said the government won’t repeat mistakes of UPA government, listing the twin balance sheet crisis faced by the banks and the mounting NPA and fleeing defaulters. She also said that the free trade agreements (FTAs) entered into by the UPA are hurting the country.