Union Finance Minister Nirmala Sitharaman on Thursday said that even though the Narendra Modi government has taken several steps to fight the economic slump, it will not be enough to deal with the devastation caused by the coronavirus pandemic, PTI reported.
“We did not restrict the opportunities to any particular sector,” Sitharaman said at the annual general meeting of the Indian Chamber of Commerce. “This was needed to keep the industry floating. But no amount of intervention by the government will be adequate.”
The finance minister said that while some “green shoots” and signs of economic revival were visible at the beginning of this year, they disappeared once the pandemic set in.
Sitharaman’s remarks came at a time when India’s economy is trying to find its feet after suffering its worst contraction as the lockdown imposed to contain the spread of the coronavirus wiped out jobs and businesses.
The country’s economy shrank 7.5% for the second quarter (July-September) of the current financial year, according to government data. With this, the India’s economy slipped into a technical recessionary phase for the first time ever – when its GDP growth is negative or declining for two consecutive quarters or more.
In the first quarter (April-June) of this financial year, the economy contracted by an unprecedented 23.9%.
The finance minister’s comments are also in tune to the predictions made by various financial institutions that India will register a negative growth rate in the full financial year 2020-’21. Global forecasting firm Oxford Economics said in a report on Thursday that India will be the world’s worst-affected among the major economies even after the coronavirus pandemic weakens.
On disinvestment target and FDI
During her address on Thursday, Sitharaman also spoke about the government’s disinvestment strategy, saying that the Centre will press ahead with the sale of public sector companies that have been approved by the Union Cabinet.
The Cabinet has approved strategic sale, along with transfer of management control, in over 25 public sector companies, including Air India, Pawan Hans, Scooters India, Bharat Earth Movers Ltd Shipping Corporation, Cement Corporation and some steel plants of Steel Authority of India.
The government has set an ambitious Rs 2.01 lakh crore disinvestment target in the current fiscal. year. However, due to the pandemic and its fallout, only Rs 11,006 crore has been met so far.
But Sitharaman said the government’s plan to disinvest some big companies was “going on fine”. “I expect Department of Investment and Public Asset Management to be able to prove that they are even more actively engaging in those disinvestments for which Cabinet has already given approval,” she added.
The finance minister highlighted that India’s Foreign Direct Investment flow was much higher compared to other emerging economies. “Today we are able to see with all the tax concessions that we have given, several sovereign funds and pension funds from abroad are keen to come to India, and that kind of an investment readiness explains why there is an inward FDI flow into India,” she added.
Foreign funds want to invest in India because the country’s macroeconomic fundamentals are strong even when there are challenges, Sitharaman said. But more importantly, it is because there is an “elected stable government” in India, she claimed.
“A government which is looking at progressive reforms, a government which does not shy away from taking very strong decisions,” Sitharaman said. “And a government which has made very clear that the disinvestment agenda, for which the cabinet has given clearance, will go on.”