“We should please understand the context of these three Fs: fuel, fertiliser, and foreign exchange. And the foreign exchange is for, in this context, purchase of gold. So, we need to understand this and we also should appreciate that the challenges are more external driven," said Finance Minister Nirmala Sitharaman.
The Minister was addressing the 37th Foundation Day event of the Small Industries Development Bank of India (SIDBI), in Mumbai.
She also said "All the good that is being done by the common people themselves, that is forgotten. And a pessimistic, cynical narrative is generated, which is just not right.
"We should appreciate that the challenges are more externally driven. We must also recognise that India's domestic economic situation remains positive and resilient even today.
Importantly, such statements have come from the FM days after Prime Minister Narendra Modi has called for austerity measures.
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After returning from his five-country visit, PM held a long meeting with his ministers and asked them to carry out reforms that can save resources, especially energy, narrow down the twin deficits of trade and current account.
What is vital now is restoring confidence in India’s growth story.
An article in 'Indian Express' says - "The technical blueprint of economic reforms is not difficult to prepare, but what is required is the political will to undertake such reforms.
The culture of distributing freebies, at the central as well as the state level, is now deeply entrenched. That’s the biggest hurdle in carrying out structural reforms."
Challenges and crises cannot be denied. India will find it difficult to clock 6 per cent GDP growth and contain Consumer Price Index (CPI) inflation below 6 per cent.
If the Strait of Hormuz remains closed for another three months, GDP growth will fall below 6 per cent, and CPI inflation will shoot above 6 per cent.
"The only rational way to avoid this is to carry out major reforms, similar to those in 1991," says the article.
Modi is not against reform. He tried agri reforms but withdrew as had to give more importance to elections of 2022 in Uttar Pradesh. Again the economic challenges have arrived and the timing coincides with ensuing elections in next 10 months in Yogi Adityanath-ruled UP.
"India cannot afford fearmongering. We need to give confidence to the people with our words and with our actions," says Nirmala Sitharaman and must be already working on reform strategies.
She also said that India's policy response has been calibrated to preserve domestic growth. The cut in diesel and petrol excise duties would lead to a revenue impact of Rs 1 lakh crore.
Apart from rising crude prices, fertiliser prices have hit "unimaginable" levels, the FM said, adding that high gold prices are creating "some challenges" on the external front.
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Taking on critics of the Indian economy amid the ongoing West Asia crisis, the Finance Minister said that Prime Minister's appeals to conserve foreign exchange must be understood in the right context. She added that naysayers were creating a “cynical narrative” about the Indian economy. Not only is this wrong, she said, but also “fear-mongering” and “India cannot afford fear-mongering”.
The government has announced a host of measures to stem the rupee’s fall.
Plagued by continued foreign fund outflows from the domestic financial markets – Foreign Portfolio Investors have dumped Indian bonds and stocks worth $24.4 billion since the war began in late February – and weak net Foreign Direct Investment inflows.
As on May 15, the reserves were down around $40 billion compared to pre-war levels. Further, the RBI’s gross forex sales of $29.6 billion in March was the highest in 13 months and occurred even as net FDI during the month was in positive territory for the second month running.
One argument is the fertiliser subsidy bill, budgeted at Rs 1.71 lakh crore for FY27, is almost certain to exceed Rs 2.25 lakh crore.
The ultimate solution — the real brahmastra — lies in reforming the entire chemical fertiliser subsidy regime by moving towards a direct benefit transfer system on a per-acre basis, integrated with the PM-Kisan scheme.
Concerns relating to tenant farmers can be addressed by triangulating different data sets, provided the government gives this reform the same priority it once accorded the Jan Dhan-Aadhaar-mobile linkage initiative.
ends
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