Home / News / India /  Nirmala Sitharaman says economic growth support to continue amid inflation fight

Finance Minister Nirmala Sitharaman has said that support for India's economic growth will continue through fiscal spending amid Reserve Bank of India's (RBI's) fight against inflation. Sitharaman said in an interview with Bloomberg on Friday that multiplier effect from supply-side spending can keep fueling the rebound from the Covid-19 pandemic, which will balance the Central Bank's plan to begin moving toward removing accommodative monetary policies.

“The growth is not getting compromised, because the policies of the government have also been in such a way that supply-side supports have continued including infrastructure investments," said Finance Minister Nirmala Sitharaman adding, “So if we are giving this good, solid push from the government side, the Reserve Bank looking at slightly moving towards management of inflation would not hurt growth."

The Indian Finance Minister defended the Central Bank's timing to pivot toward inflation citing, "There was consciousness on part of the RBI that we shouldn’t do anything that will hurt the recovery from the pandemic." She went on to add that balance of power with economy is looking very sound and the economic recovery post-pandemic seems to be sustainable.

Earlier, in other interview with Bloomberg, Nirmala Sitharaman said that RBI's 7.20 per cent growth forecast for FY23 is her bottom-line and 8.0 per cent growth seems absolutely possible. However, she defended RBI saying oil prices have remained elevated for longer than expected.

“It had to be a careful balancing," she said. “They’re being sensitive to the developments on the ground."

Finance Minister Sitharaman's comments follow the decision earlier this month by the RBI to begin signaling the coming end of pandemic-era loose policy and prioritizing taming consumer prices, which has been growing above the 6% top-end of its target range during the January-March quarter.

If the inflation readings remain above 6 per cent for the next two quarters, a scenario most analysts see likely, India’s central bank is required by law to explain to the government why it missed the target, and suggest steps to bring prices under control within a specified period.

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