NEW DELHI: Finance minister Nirmala Sitharaman said the Indian economy may be facing a slowdown but there’s no danger of a recession taking hold. The government will make policy changes as and when required.
“Every step being taken is in the interest of the country,” the minister said in her reply to a discussion on the economic situation in the upper house of Parliament on Wednesday. “Looking at the economy in discerning view, you see that growth may have come down but it is not recession yet; it won’t be recession ever.”
A recession is typically defined as two successive quarters of negative growth.
Sitharaman blamed the slowing of GDP growth in the last two financial years on the lagged effect of the so-called twin balance sheet crisis — stress on banks due to nonperforming assets (NPAs) or bad loans on the one hand and heavily indebted corporates on the other. She blamed this on the Congress-led UPA government’s policies.
“That’s when phone banking was also happening,” she said, referring to political pressure on stateowned banks.
‘Slowdown Pronounced in Q1’
“It (slowdown) has not dawned one morning. It has obviously got a trail. If you want to go back to see where the trail lies, you know where it lies,” the finance minister said.
The economy expanded 5% in the June quarter, its slowest annual pace in six years. Second-quarter GDP growth numbers, to be released on November 29, are not expected to be any better, according to several research reports.
The GDP slowdown was pronounced in the first quarter of FY20, the minister said.
Sitharaman said the government had taken several measures to address issues faced by the various sectors, including recapitalising public sector banks and consolidating them.
“I just want to highlight that 32 steps were taken by me… Every step that is pertaining to different sectors, whether it is MSME (micro, small and medium enterprises) or banks… these steps… I review on a weekly basis,” she said.
The minister compared the economic data during the second term of the UPA with the performance of the last five years.
She said inflation was currently below the targeted range, economic expansion was much better and so were other macroeconomic indicators.
She said the direct tax-to-GDP ratio rose from 5.5% in FY15 to 5.98% in FY19. Also, revenue receipts have grown by 18%, revenue expenditure by 13.97% and capital expenditure by 15.31% in the first half of this year.
“Everything is coming down? Not at all,” she said in response to Opposition criticism. “We are conscious of the challenges faced by sectors… we shall ensure every sector and challenges are heard by us.”
She said Prime Minister Narendra Modi was taking personal interest in the matter “so that the economy can be on a higher trajectory.”
The Congress, the Trinamool Congress and the Left parties staged a walkout, saying Sitharaman was reading out her budget speech rather than addressing issues facing the economy.
She said NPAs in the banking sector rose after lenders began recognising bad loans and added that provisioning for this didn’t mean “writing off ” the debt.
Allaying concerns over the revenue position of the government, she said direct tax and goods and services tax (GST) collections have both seen an increase in the first seven months of the current fiscal year compared with the same period last year.
The minister rejected criticism that her maiden budget on July 5 had failed to address the slowdown, forcing her to announce further measures within a month of its passing by Parliament.
Sitharaman said she had recognised the need for recapitalisation of banks and reforms in her budget speech, as had the Economic Survey.
Capital infusion of Rs 70,000 crore into banks, following that speech, had led to a rise in the ability of banks to lend. More than Rs 2.5 lakh crore has been given in loans during the recent outreach programme, she said, adding that reforms such as the Insolvency and Bankruptcy Code (IBC) had begun to show results.
On GST, out of the Rs 6.63 lakh crore net collections targeted in the year through March 31, 2020, Rs 3.26 lakh crore had been collected in the April-October period, she said. Month-wise GST collections have grown year-on-year, she said, adding direct tax collections at Rs 6.86 lakh crore in April-October too had seen a growth of 4.8%.
“GST is not doing badly. It could do better,” she said.