BackCentre working to slow inflation, FM Nirmala Sitharaman says
India protected from the risk of stagflation due to its relatively slow inflation rates and fast growth, Sitharaman says
PremiumThe government is working to slow inflation further, and is closely monitoring the prices of essential commodities, finance minister Nirmala Sitharaman said, adding that the country is protected from the risk of stagflation due to its relatively slow inflation rates and fast growth.
“Inflation has been declining since April, and it is declining further. The government will further bring down inflation and is constantly watching the price situation of essential commodities," Sitharaman said in her response to a discussion on supplementary demands for grants in the Lok Sabha.
Stagflation is characterized by slow economic growth and high inflation rates. But India’s economy is growing among the fastest in the world, and inflation is slowing, Sitharaman said.
Several supply-side measures have been taken by the government to address inflation, including reduction in excise duty by ₹8 per litre on petrol and ₹6 per litre on diesel on 21 May, prohibition of export of wheat products, imposition of export duty on rice, and reduction in import duties, she said.
In addition, the government has imposed stock limits on edible oils and oil seeds, and the inclusion of soya meal as an essential commodity in the schedule of the Essential Commodities Act, 1955 and imposition of a stock limit on soya meal, she added.
Earlier this week, government data showed that retail inflation slowed to an 11-month low of 5.88% in November due to decreased food prices.
As per law, monetary policy committee headed by RBI governor has been given the task of maintaining inflation at 4% with the upper tolerance limit of 6% and the lower tolerance limit of 2%.
On Wednesday, data showed that wholesale inflation eased to a 21-month low of 5.85% in November.
Sitharaman cited the World Bank’s report on the Indian economy, highlighting the government’s policy response of combining demand and supply side policies in response to external shocks given the limited fiscal space. She noted that the Indian economy grew faster than most major emerging market economies in the September quarter. The minister assured members that the government would be able to meet the 6.4% fiscal deficit target for the current fiscal year.
“The current situation clearly gives me the feeling that we would be able to comply with what we have said in the budget," she said.
She noted that the rupee has been gaining strength against other currencies and has outperformed emerging market currencies against the dollar.
Sitharaman also noted that banks’ non-performing assets fell drastically to 7.28% of total advances at the end of March due to measures taken by the government.
She highlighted the significant increase in budget allocation to the farm sector in recent years, with the budget for the ministry of agriculture and farmers’ welfare rising more than fivefold to ₹1.39 trillion in the current fiscal year from ₹25,460 crore in FY16.
After a vote, the first batch of supplementary demands for grants for FY23 and demands for excess grants for FY20 were approved. These provide additional funding for various government programmes.
The Parliament has thus approved additional spending of ₹4.36 trillion for FY23, including over ₹1 trillion for fertilizer subsidies due to the war in Europe driving up prices of soil nutrients and their feedstocks. The net cash outgo is, however, expected to be ₹3.26 trillion, as the additional expenditure will be offset by savings from various ministries and departments or by increased receipts and recoveries totalling ₹1.1 trillion.
The Parliament also approved an additional expenditure of ₹80,348 crore towards food subsidies and additional funding for the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) programme. This funding will support the government’s efforts to provide food security to the poor.
Sitharaman noted that only 8% of budget estimates are being brought under the supplementary demand for grants in FY23 amid a post-pandemic, war-affected global economy, compared with 20% in FY09, immediately following the global financial crisis.
Supplementary demand is an additional grant needed to meet the government’s expenses beyond the amount previously approved by Parliament.
Sitharaman said the government is responding to the needs on the ground and has seen an increase in revenue, allowing it enough fiscal room to seek additional grants.
The need for additional expenditure arose due to the increasing cost of fertilizer subsidies due to the Russian invasion of Ukraine and the government’s ongoing support for providing foodgrains to the poor.
Of the additional expenditure approved under the first demand for the grant, ₹60,110 crore will be allocated towards food subsidies (to the Food Corp. of India under the National Food Security Act) and additional funding for the PMGKAY scheme. However, the highest expenditure is towards the payment of fertilizer subsidies.
Expenditure of the ministry of petroleum and natural gas to pay cooking gas subsidies to the poor under the Pradhan Mantri Ujjwala Yojana, among others, totalling ₹29,944 crore, has also been approved.
About ₹46,000 crore additional expenditure was approved for the rural development ministry, which includes ₹4,920 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme. However, Sitharaman said that demand for jobs in rural areas was seeing a declining trend.
The additional expenditure also includes ₹13,669 crore and ₹12,000 crore to meet the spending requirements of the telecom and railway ministries, respectively, besides about ₹10,000 crore for transfer to GST compensation fund to provide compensation to states and Union territories.
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