More Stories

Informist, Wednesday, Dec. 11, 2024

 

Please click here to read all liners published on this story

--Sitharaman: Govt, industry must strive to restore normalcy
--CONTEXT: Finance Minister Sitharaman at CII's Global Economic Policy Forum
--Sitharaman: No country can tackle inflation in isolation
--Sitharaman: Inflation globally a major challenge
--Sitharaman: Supply disruption primary cause of inflation, need to stop it
--Sitharaman: Need to blend economic needs with political strategies
--Sitharaman: Concentration risk of goods production currently playing out
--Sitharaman: Must ensure geopolitical risks don't threaten econ well-being
--Sitharaman: Supply chains need to be protected from geopolitical issues
--Sitharaman: Finding resources to address climate change a global issue
--Sitharaman: Need more innovations in agriculture, allied activities
--Sitharaman: Industry must look at agri innovation to address food inflation
--Sitharaman: Urge industry to work with govt to train youth for jobs
--Sitharaman: Intergenerational debt is mounting on several countries
--Sitharaman: Important for industry, countries to manage debt
--Sitharaman: Responsible economies can't run on borrowing
--Sitharaman: Priority of this decade is to manage debt sustainably
--Sitharaman: Cannot burden forthcoming generation with mounting debt
--Sitharaman: Countries must borrow, but only for asset creation
--Sitharaman: Important for both federal, state govts to manage debt

 

NEW DELHI - Responsible economies can't run on borrowings, but a government cannot stop borrowing suddenly, Finance Minister Nirmala Sitharaman said Wednesday. Speaking at CII's Global Economic Policy Forum 2024 here, she highlighted that economies need to prioritise sustainable debt management in the coming decade. "We need to borrow, economies need to borrow, but for asset creation, creating values," the minister said. 

 

The Indian government's market borrowing has doubled to INR 14.01 trillion on a gross basis in the current financial year from the pre-pandemic level of INR 7.1 trillion in 2019-20 (Apr-Mar).

 

Sitharaman's comments on debt management came at a time when the government, in its latest Budget for FY25, announced targeting the debt-to-GDP ratio from FY26 onwards in order to lower the debt stock and keep the interest burden in check.

 

On Wednesday, Sitharaman said intergenerational debt is already rising, so governments must ensure that future generations are not burdened with mounting debt.

 

The government's emphasis on lowering interest payments seems aligned with the assessment of rating agencies. In an interview with Informist in August, Christian de Guzman, senior vice president at Moody's Ratings, said that a rating upgrade for India hinges on its ability to cut back on its debt burden and more importantly, its interest payments as a percentage of revenues.

 

The Union Budget for FY25 has pegged the government's interest expense for the current fiscal at INR 11.63 trillion against a capital expenditure of INR 11.11 trillion. The government will spend 19 paise of every rupee it earns in FY25 to pay interest on past borrowings, according to the Budget. To give a comparison, the government will spend 4 paise of every rupee earned on pensions and 6 paise on subsidies.

 

She said that the endeavour of debt reduction is not just the responsibility of federal governments, but also of states--another assessment that is key for a ratings upgrade. Industries must collaborate with governments in lowering debt, she added.

 

 

INFLATION DYNAMICS

At Wednesday's event, Sitharaman also spoke about the global challenge of inflation, saying that no nation has the power to tackle it in isolation. At the heart of this intertwined nature of inflation, she said, was supply disruption emanating from geopolitical issues. Governments need to stop supply-chain disruptions and smoothen the movement of goods, she said. "Governments, industries should strive for some normalcy, stop wars and bring back peace," Sitharaman said. 

 

To address inflationary risks arising out of geopolitical tensions, the finance minister said that it was key for governments to blend economic needs with political strategies. Her comments hold significance in light of US-President elect Donald Trump's tariff threats to Chinese imports which could likely impact global trade dynamics. She said that currently, concentration of goods production is playing out, and so it is pertinent for the government to diversify its trade ties. "We must ensure geopolitical risks do not threaten the well-being of the economy," she said. 

 

India has struggled with inflation in the last few years owing to geopolitical disruptions. Food inflation has particularly been a pain point. To address food inflation pressures, she said the government needs to bring more innovation in the agriculture and allied activities sector. The industry also has a role to play in this, she added. 

 

India's CPI inflation rose to a 14-month high of 6.21% in October from 5.49% in September. Food inflation rose to a 15-month high of 10.87% in October from 9.24% in September. Sequentially, the food price index rose 2.6% in October, which pushed the general index of the CPI 1.3% higher from September. Within food, the biggest month-on-month increase in prices was seen in vegetables, which rose 8.2% in October from the previous month. Edible oil prices also rose sharply in October, up 6.0% from September. Prices of cereals and pulses also continued to rise in October.  End

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Tanima Banerjee

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.