Fiscal spending will drive growth: Finance Minister Nirmala Sitharaman
Finance Minister Nirmala Sitharaman on Monday said economic growth will continue to boost investment along with fiscal spending. It will “speed up the economy based on the idea of growth at the macro level complemented by all-inclusive welfare at the micro level”, she said.
Sitharaman was speaking at a virtual meeting of BRICS group finance ministers and central bank governors.
The statement underscores the government’s continued focus on capex, as it bets big on its high multiplier effect. The Center has budgeted a capital expenditure of Rs 7.50 trillion for FY12, which is 27% higher than the actual expenditure of Rs 5.93 trillion (including Rs 62,057 crore capital in Air India) in FY12. The Finance Ministry has already asked various infrastructure ministries to keep the expenditure.
Several agencies have cut their projections for India following the rise in global commodity prices after the Ukraine war. They now project India’s FY13 growth to be in the range of 7.2% to 8.5%, compared to 8.7% in FY12 (the previous fiscal year’s growth was aided by an increasingly contracting base). .
Many analysts have stressed the need for a continued increase in the Centre’s capital expenditure, especially as private capital expenditure has yet to see a broad-based resurgence and growth from supply-chain disruptions due to the Ukraine war, rising oil prices. There are significant downside risks to and rising interest rate scenario. It will also have to pressurize CPSEs to increase their capex. In FY22, CPSEs fell short of their revised capex target of Rs 5.75 trillion.
The Minister said that BRICS should continue to serve as a platform to facilitate exchange of experiences, concerns and ideas for rebuilding a sustainable and inclusive growth path.
In a statement, the finance ministry said the participants also discussed other heritage finance issues, such as infrastructure investment, New Development Bank (NDB), BRICS Contingency Reserve Arrangement (CRA), etc.