B20 Summit: Sustained global economic recovery a key issue for next few years, says FM

Due to the central, state governments' willingness to lead capex in the country, green shoots of capex from the private sector are now showing, Sitharaman said

Finance Minister Nirmala Sitharaman said on August 25 that sustained global economic recovery will be a key issue in the coming few years as the world recovers from the aftermath of the COVID-19 pandemic and the Russia-Ukraine war.

Sitharaman, while speaking at the B20 Summit in Delhi, said that most countries have since the pandemic seen a sharp recovery in their economic activity for a short period, which was followed by a period of fall, and going forward they are looking at ways to sustain economic recovery.

"Sustaining economic growth has become the biggest question, not just for this year, but for the next few years," Sitharaman said.

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She added that this is not only hard because of the COVID-19 pandemic, and the Russia-Ukraine war but also because of energy security-related issues, food security-related issues, climate change issues, and switching to green fuels.

"All these issues are aggravating the concerns of how to sustain economic recovery," Sitharaman said.

The Finance Minister added that despite these challenges the Indian economy is the fastest-growing economy in the world and the Gross domestic product (GDP) numbers for April-June 2023-24 are expected to be good.

She added that the current government's willingness to implement reforms is the key to why the Indian economy has performed better than the world.

Sitharaman said that in order to sustain the economic recovery, the government is focused on five key areas -- containing inflation, increased expenditure in infrastructure growth, investment in health and education, investment in climate change finance, and diversification of supply chains.

She added that due to the central and state governments' willingness to lead capital expenditure in the country, green shoots of capital expenditure from the country's private sector are now showing.

Sitharaman said that unlike other world economies, the Union government has not focused solemnly on containing inflation through elevated interest rates and has instead led the way with increased expenditure.

"Obsession with using rate hikes as a tool to control inflation, and not manage supply, will not give a complete solution to inflation... The task for central banks is to keep in mind growth while they look at controlling inflation," the minister added.

The finance minister also said that diversification is key for sustained economic growth going forward as the world economy cannot survive another jolt to global supply chains.

She also said that free trade agreements with Canada, The United Kingdom and with countries of the European Free Trade Association (EFTA) are likely to be announced soon.

EFTA includes Liechtenstein, Norway, Iceland and Switzerland.

Sitharaman also said the current government led by Prime Minister Narendra Modi has been consistently carrying out reforms for the past nine years with stable results, while reforms earlier were erratic.

The government did not stop carrying out reforms even during the COVID-19 pandemic, she said.

"Earlier reforms happened, but their results were erratic. In the last nine years... reforms even during Covid happened because we thought it was an opportunity rather than a challenge," she added.

The three-day B20 Summit started today. Business 20 or B20 is one of the G20 forums representing the global business community, which was set up in 2010. The G20 Summit will be held next month.