FM hints at fresh round of stimulus for this fiscal year

The government has not closed the option of a third stimulus package in the current financial year, finance minister Nirmala Sitharaman said on Monday, a week after announcing measures to boost consumer spending and capital expenditure.

“I have not closed the option for another stimulus package if it comes out to be, because every time we announced one, it has been after a lot of consideration of inputs which have come from various sections of society. Then we sit and work it out within the ministry and prime minister’s office and then take a final call. So, I have not closed the option to come up with one more stimulus,” Sitharaman said at the virtual launch of the autobiography of 15th Finance Commission chairman N.K. Singh, Portraits of Power: Half a Century of Being at Ringside.

On 12 October, the finance minister announced a stimulus package worth ₹46,675 crore, including incentives for central government employees to spend more on consumer durables as well as higher capital expenditure for both the Centre and states. But rating agency Moody’s said the measures worth 0.2% of GDP will provide only limited support to growth and highlighted the “very weak fiscal position” of the country.

In an interview on 15 October, expenditure secretary T.V. Somanathan said though nothing is planned, another stimulus cannot be ruled out. “As of now, I don’t think there is anything else planned. But nothing can be ruled out. The finance minister has always said we will keep watching the situation and react periodically as and when the situation warrants. So, I can’t give you a commitment either way,” he added.

Asked whether the finance ministry will come out with its own projection for the GDP contraction for the fiscal, Sitharaman said the ministry has just started making an assessment after waiting for the first half of the fiscal to be over. “We have got a lot of inputs that are very different from what we had in July. Perhaps we will have to come up with a statement, whether we do it in public or whether I do it in the Parliament is one thing but obviously, the finance ministry will have to make an assessment on what it is going to be like,” she added.

The Reserve Bank of India has projected the economy to contract 9.5% in FY21 while the International Monetary Fund has estimated GDP to shrink 10.3%.

Replying to another question, the minister said the cabinet will soon take up a proposal to identify the strategic sectors in which public sector enterprises would function, opening up other sectors to the private sector as announced as part of the Atmanirbhar Bharat package.

“There should be a clear cut mention of how the Indian economy has to be. That shift away from the socialistic baggage that we have been carrying all the while, some desirable and some burdensome—that will make a big directional shift and I desire that to happen.”

Sitharaman said she wants to see federalism become robust. “Continuous real-time robustness is what is going to make this country stronger. Even prime minister periodically mentions every state has to develop. Even if one state is left behind, it will become a baggage. Otherwise, you will have the speed with which you want to grow being slowed because of the pull factor of those who are left behind,” she added.

Among other major reforms, the finance minister said she wished India’s education system could match all the needs of its youth and that India could become an education hub for foreign students.