ET Awards 2021: Interest rate hikes will not affect our infrastructure investment plan, says FM Sitharaman

ET Awards 2021: Interest rate hikes will not affect our infrastructure investment plan, says FM Sitharaman – Mail Bonus

Finance Minister Nirmala Sitharaman said interest rate hikes would not affect government spending plans in a conversation with Bodhisatva Ganguli at the Mumbai Economic Times Awards on Saturday. The winner of the Business Reformer of the Year award also said that India’s reforms and measures on cryptocurrencies had been praised and closely monitored. Modified excerpt:

Interest rates have risen. Will this affect the government’s plan to revive the economy, which in the last budget was largely through spending increases?
Well, no, because since international commodity prices behave as they have and … situations like Russia Ukraine matter, when we made the budget there was no idea of ​​the war. But certainly… there were enough and more speculations about the rise in commodities, the rise in crude oil and also the international disruption in the supply chain… even when we were preparing for the budget. Also to be fair, the US Federal Reserve had very clearly indicated that they were going into quantitative easing and therefore I think we were not surprised when the Bank of India (RBI) took its own step and I do not see it it affects our infrastructure investment.

Was the RBI rate hike a surprise?

The last Monetary Policy Committee, I think, has indicated that it is time for them to act as well. It is the timing that surprised many, but the act, people believed, should have been done anyway – to what extent, could have been different. So in a way, it was a concerted action – Australia did it … and that night the United States actually took the first step. So I see more understanding among central banks nowadays … the understanding of how to deal with post-pandemic recovery is therefore not unique or typical of India, it is a global issue.

In the neighborhood, high fuel prices, higher inflation than ours and depleted foreign exchange reserves have caused problems similar to those we faced in the early 1990s. Is that a matter of concern and was this discussed at Fund Bank meetings in the context of India?

No, it was not discussed, although of course the discussion was about the neighborhood … This is not a compliment – I want it to be recorded because you talked about what was discussed in Washington. It was a great admiration that we continued to reform even during the pandemic … that India did not allow its poor to suffer, especially the way the food grain program has been run. There was also a clear appreciation … that the Prime Minister literally led the way and did not give the impression that the country was probably not sure how to handle it … Repeatedly, a fact that I heard that India is at the forefront of the digital economy , the payment system, how we could use (this) during a pandemic and do it in a very cost-effective way. And how we have adopted technology to make it simpler for income tax or GST has also become a topic of discussion.

You went to Germany after that with the Prime Minister. What did you have from these visits?

Covid’s recovery, even after the International Monetary Fund’s slowdown in global economic growth, puts India at the top as it’s rapidly growing out of comparable economies, and the fact that India … is now the center for providing much that was otherwise in one basket. It is a clear recognition both in Germany and also in the various meetings I had in the United States that India’s economy has now become the second best place for investment … Atmanirbharta did not close its doors, we are really trying to strengthen ourselves.

Due to geographical developments, grants increase. Pradhan Mantri Garib Kalyan Anna Yojana was recently extended. Will it affect fiscal math?

Regarding the meal plan, we understood (until we can) be sure that (the poor) could earn a living comfortably, we wanted the meal plan to be extended, for which the external understanding of the limit is of course about 2.10 Rs. ISK 2.20 million. In a way, I think this calculation was in our minds and even in the preparation of the budget. The fertilizer issue itself last year even unexpectedly took up a very large part of our budget and we had to come in extra during the compensation demands. This year, even when we went in because of the way crude oil was playing out and because of supply chain disruptions, as I said, commodities, we also had these three components in inputs that go into fertilizer production. So we were aware that even this year we might have to give bigger figures for fertilizer concentrations because the intention is not to carry it forward or burden farmers with it, so to some extent we were prepared for extra allocation for both Anna. Yojana and also for fertilizer.

The biggest macroeconomic challenge right now is inflation. What is the idea of ​​lowering the goods and services tax rate (GST)?

The first thing I know theoretically and also the economic observers would rather I go to the GST council tomorrow and say one rate and this is it, everything is in, petrol is in, everyone is happy. No, that’s not happening, I’ll be very clear. The Committee chaired by the Prime Minister (Basavaraj Bommai from Karnataka) will no doubt be required to submit its report. The mission statement that was given to them and also the issues that have been regular in the GST Council was to see how we at least go back to the income neutral level that GST was entered into. And of course, tariff optimization has been under discussion. point out over three or four meetings of the GST Council… which also comes in. Wherever there is a turnaround, we wanted to correct it because we can not afford to continue giving these refunds and it also affects the PLI system. So it’s not just the black and white question about the report that comes from the committee and tomorrow I will call the GST council and it’s just looking at raising interest rates. No, unfortunately, that does not happen at the next meeting.

There is a perception that some asset sales plans have slowed down. Are you going to speed them up?

I’ve heard this since 2019. Air India happened, same question. Neelachal Ispat happened, Pawan Hans has happened. You keep asking. We will continue.

Do you feel the need to further strengthen your foreign exchange reserves and do you have an ideal level in mind?

No, but since revenues come from all the sources they come from and also with exports that show a very clear upward path … especially the service sector also shows clear signs of good buoyancy … RBI has talked about what kind of reserves they can have. They can even probably plan higher so that trust comes from the central bank, that’s great. For us, the confidence must be in how we are going to boost exports, how we can get started with it, how agriculture can benefit from exports that are clearly emerging. Farmers are also now choosing to sell to the merchant who will export it and give them a better income rather than looking at MSP (minimum support price).

Exports have recovered. Are we going to see more import restrictions to reduce the trade deficit?
No, I would like to take this opportunity to say that the principles of taxation or customs duties that are imposed, even with untouched atmanirbharta, are to ensure that the taxation is levied on the goods that are produced in the country. We do not want to allow the door to be opened for those who come in at predatory prices, throwaways, for the products produced here, especially the products produced by MSME companies … The logic and principle of strengthening the Indian economy is that who has guided us in imposing tariffs, let’s be clear.

Where do we stand in cryptocurrencies? This was also stated at Sjóðsbanki’s meetings.

Indeed, many countries have shown great interest. The G20 wants to know, especially since from December our country will take over the G20. We’ve had a special discussion about that. The FSB (Financial Stability Board), which is under the G20, had also done a lot of work on cryptography. The fact that India has chosen to go through the central bank-driven digital currency is also well received.

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