FM Sitharaman, economists discuss slowing growth, budget priorities, and macroeconomic challenges
- Economists emphasized the need to address slowing growth while balancing short-term budgetary priorities with long-term economic goals.
Finance minister Nirmala Sitharaman on Friday kicked off the first round of pre-budget consultations with leading economists, focusing on strategies to bolster manufacturing, curb food inflation, create jobs, and revive private sector investment and consumption growth.
The discussions, held ahead of the Union Budget slated for 1 February 2025, come at a critical juncture for India’s economy.
The meeting, attended by senior finance ministry officials and a host of eminent economists, centred on pressing issues such as inflation, employment, trade, health, and private sector investment. Economists emphasized the need to address slowing growth while balancing short-term budgetary priorities with long-term economic goals.
One prominent suggestion was the creation of a national manufacturing policy to strengthen the sector, reflecting the government's renewed focus on industrial revival.
Other proposals included boosting demand through reductions in personal income and corporate taxes, according to Ashwani Mahajan, national co-convener of Swadeshi Jagaran Manch.
Participants also highlighted strategies to attract investment, support agriculture, and ensure fiscal consolidation. “The government appears firmly committed to fiscal consolidation while aiming to drive growth through infrastructure development,” said one economist on condition of anonymity.
Who was at the table?
The dialogue featured notable economists and academics, including Suresh Babu (Madras Institute of Development Studies), C. Veeramani (Centre for Development Studies), Nikhil Gupta (Motilal Oswal), Samiran Chakraborty (Citi Group), Sitikantha Pattanaik (NABARD), Gaura Sengupta (IDFC First), Narmata Mittal (SBI Mutual Fund), Lekha Chakraborty (NIPFP), Bharat Ramaswamy (Ashoka University), and chartered accountant Anil Sharma.
“The finance minister and ministry officials did not provide assurances on whether some of the suggestions would be implemented,” said the economist. Broader macroeconomic concerns, such as fiscal deficit targets and growth momentum, dominated the discussions, the person added.
Economic crossroads
The consultations come as India grapples with a slowing economy.
Real GDP growth slipped to 5.4% in the September quarter, the lowest in nearly two years, dragged down by a slowdown in manufacturing, urban consumption, and weak corporate earnings. For the first half of the fiscal year, GDP growth stood at 6%, requiring an ambitious 8.3% growth in the second half to meet the Reserve Bank of India’s (RBI) projection of 7.2% for the full year.
Meanwhile, retail inflation based on the consumer price index (CPI) surged to 6.21% in October, a 14-month high, breaching the RBI’s medium-term target of 2-6%. Food inflation, a persistent challenge, climbed to 10.87%, the highest in 15 months, reflecting soaring prices of essentials. Food accounts for nearly half of India’s consumption basket, compounding the impact on households.
“The government is focusing on the supply side to address food inflation,” said the economist mentioned above. Suggestions on employment generation were also put forward, the person added.
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Business NewsEconomyFM Sitharaman, economists discuss slowing growth, budget priorities, and macroeconomic challenges
First Published:6 Dec 2024, 08:03 PM IST
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