Finance Minister Nirmala Sitharaman expects the economy has turned “for the better” in Q2 and Q3 after a dismal 23.9 percent fall in Q1FY21 due to the pandemic and lockdowns, adding that the Centre would not be averse to “one more stimulus if necessary”.
“We are hearing everyone out, we are analysing every area of the economy. I am open to one more support if necessary. We are constantly exchanging a lot of thoughts with industry,” she said as per Hindustan Times.
When asked if the package would be immediate, Sitharaman added: “One more may be needed is what we are hearing from the people who interact with us, and we are trying to see what it is that we can do. There’s no point in me hurriedly getting something out. What we have announced till now, it is not as if it has benefited one at the cost of another.”
Crediting the massive Q1 contraction to the COVID-19 pandemic and subsequent lockdowns, the finance minister said industries have since seen capacity utilisation rise to pre-COVID levels.
“If in Q2 at least 50 percent levels have been reached, then it can’t be as bad as Q1. The revival is also happening in many labour-intensive areas … as migrants have started returning to work. Some industries tell me that domestic demand is increasing … they are also seeing export orders increasing faster than expectations. I guess, Q2 and Q3 will be better,” she added.
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She was optimistic revenue receipts would pick up as already being seen in goods and services tax (GST) collections in states, but biggest impact would be in corporate tax and income tax would also suffer on account of the lockdown.
On the Centre’s initiatives to boost the economy, Sitharaman pointed to the ‘Vocal for local’ and ‘Atmanirbhar’ campaigns. “… ensuring policy support exists for them, ensuring incentivisation will happen for them, and create the necessary ecosystem for them.... Even if you think the result will be long-term, there will be an immediate change in sentiment, production priorities, investment priorities,” she added.
When quizzed over how much India has lost on account of the pandemic, Sitharaman said the answer can be given once the COVID crisis has passed.
On states’ borrowing limits, the finance minister said they “keep monitoring” it and that not one state has exceeded the 3 percent of GSDP limit available to them in a normal year. She also noted that the Centre has allowed states to borrow another half a percent more unconditionally; another 1 percent with conditions; and another half percent contingent on certain reforms.
She did acknowledge that states are facing challenges: “… there is no denying that. They are the ones fighting COVID at the ground level. And they expect the Centre to be more supportive, which is understandable.”
On relaxations of the Fiscal Responsibility and Budget Management (FRBM) Act, Sitharaman said she may not have a choice to not do so. Adding: “… among the four engines that support the economy, three have come to a complete standstill. It is public expenditure which has to do the heavy lifting.”
On sectors that she is hopeful about, the finance minister said the agricultural and rural economy have “great encouragement” and is the “big spark plug for Indian revival.”Follow our full COVID-19 coverage here