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Informist, Monday, Nov. 18, 2024

 

--Sitharaman: Not entirely govt's job to convince rtg agencies for an upgrade 
--Sitharaman: Careful about fisc consolidation, but not into fisc tightening 
--Sitharaman: Growth, econ resilience must be considered for rtg upgrade 
--Sitharaman: Indian econ has many reasons to get better rating 
--Sitharaman: Readily agree India's ratings must be improved 

--Sitharaman: High-frequency data show sustained econ momentum 

--Sitharaman: Aware of challenges to growth, no cause for concern 

--Sitharaman: Need to improve storage facility to avoid food price uptick 
--Sitharaman: Don't want to debate if perishable items must be out of CPI 
--Sitharaman: Top 3 perishable items giving pain to inflation mgmt 
--Sitharaman: Top 3 perishable items giving pain to inflation 

 

NEW DELHI - The government is aware of the possible risks to India's GDP growth, both external and internal, but there is no cause for concern as high-frequency indicators show sustained economic momentum, Finance Minister Sitharaman said Monday. The minister's remark comes amid concerns of an economic slowdown, especially after the Reserve Bank of India cut its growth projection for Jul-Sept to 7.0% from an earlier estimate of 7.2%.

 

The underwhelming corporate performance in Jul-Sept has also added to the concerns of moderating growth. The National Statistical Office is likely to release data on India's GDP growth for the September quarter on Nov. 29.

 

"Recent high-frequency indicators reflect sustained economic momentum, record e-way bill generation, buoyant trends in rural demand, and strong PMI (Purchasing Managers' Index) data for manufacturing and services underscore the steady pace of economic activity," Sitharaman said at the State Bank of India's Banking and Economics Conclave 2024 in Mumbai. India's PMI manufacturing averaged 57.4 in the second quarter of the fiscal year and PMI services averaged to 59.6. E-way bill generation, at INR 319.40 million, posted a record-high print in Jul-Sept. 

 

India's GDP growth had slowed to a five-quarter low of 6.7% in Apr-Jun. For 2024-25 (Apr-Mar), the RBI has projected a GDP growth of 7.2%. On the other hand, the finance ministry expects it to be 6.5-7.0%.

 

Commenting upon India's inflation trajectory, Sitharaman said the price of the top three perishable items--tomatoes, onion, potatoes--has been posing a challenge to inflation management. The CPI print for October breached the central bank's target range to gallop to a 14-month high of 6.21% due to a sharp rise in food inflation. 

 

While Sitharaman dissociated from the debate of whether perishable food items should be included in the CPI basket or not, she said that focusing on improving storage facilities can help prevent an uptick in inflation due to high food prices.

 

The debate on inclusion of food prices in the CPI basket started this year after Chief Economic Adviser V. Anantha Nageswaran, in the Economic Survey for FY24, suggested that policymakers should rethink the inflation targeting strategy and focus on excluding food prices. Considering food inflation is often supply-induced, deploying short-run monetary policy tools might be counterproductive, the survey had said.

 

RATING UPGRADE

The Indian economy has shown excellent resilience in the aftermath of the COVID-19 pandemic, the outbreak of the Russia-Ukraine war, and supply chain disruptions, Sitharaman said. "For an economy to maintain the pace of growth of its GDP, gives enough reason and more for its ratings to be better considered."  After contracting 5.8% in the pandemic year of FY21, India's GDP has registered very high rates of growth. In FY24, the economy beat all estimates with 8.2% growth.

 

"But it is not purely the government's job to convince rating agencies," Sitharaman said. Top rating agencies Fitch and Moody's have maintained their lowest investment-grade ratings of BBB- and Baa3, respectively, for India for several years now, with a stable outlook. S&P has also rated India BBB-, but it upgraded the outlook to positive this year.

 

The government has also undertaken significant fiscal consolidation to 5.8% of GDP in FY24 from 9.2?ter the pandemic. It has pegged the deficit at 4.9% of GDP for the current year. "I want to assure fiscal consolidation is not done without any consideration of growth," Sitharaman said. 

 

"We have been careful about it (fiscal consolidation) but being careful is not tightening. Being careful about your fiscal situation is fundamental for countries like India, which have to get their macroeconomics right, so that we are not looked at as one of those easy-go republics," Sitharaman said.  End

 

 

Reported by Krity Ambey

Edited by Vandana Hingorani

 

 

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