Economy reflating at a faster rate than expected: FM Sitharaman
The government and the Reserve Bank of India are coordinating for a quicker economic recovery
Steady economic growth and capacity expansion in the past two months has pulled the country’s economy out of its pandemic trough, Finance Minister Nirmala Sitharaman said while speaking at the HT Leadership Summit on Friday.
It is not just due to pent up demand but also because of additional demand coming in, and the recovery will sustain, she said.
She also said that the government and the Reserve Bank are coordinating for a quicker economic recovery. The uptick in inflation, which held back the RBI from cutting interest rates on Friday, was seasonal and she was not overly worried about it, Sitharaman said.
"The blip in inflation particularly of food items will ease out. I don't see this inflation, particularly on food items, continuing where it is, it will come down," she said.
Noting the consistent Rs 1 lakh crore GST collections for two months and expansion plans of the industry in core sectors indicate that there is additional demand in the economy, she said, “I am not sure if just the pent up and festival demand will explain the more than Rs 1 lakh crore collection in GST for two months… I'm also talking to various industry leaders who are looking at capacity expansion.”
She further noted that core sector industries like cement, iron, and steel are going towards expansion.
"It is an indication that additional demand is coming in. It is not pent up or festival driven demand. It is likely to sustain," she emphasized.
Speaking about the unemployment situation, which worsened due to the Covid-19 pandemic, FM Sitharaman said the fiscal deficit in the current fiscal to March 2021 will certainly be higher than the one projected in the budget for 2020-21. She, however, did not give specific details.
On inflation, she said, "I am actually not worried about inflation to the extent that there are seasonal ups and downs in prices and commodities where we are seeing hike in prices are largely seasonal."
She said fruits and vegetables, and edible oil are seeing seasonal fluctuation and the government is making a conscious call to fill in supply-level shortages through imports and sorting out logistical constraints.
The RBI earlier in the day said retail inflation is likely to remain elevated at around 6.8 percent in the third quarter of the current fiscal.
The Finance Minister further said the RBI and the Finance Ministry have to maintain a continuous balance to revive the economy and sustain the growth momentum.