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Informist, Thursday, Feb. 27, 2025

 

--Sitharaman: Need greater coordination among financial regulators 
--Sitharaman:Reform not Union agenda alone, states must take it up seriously 
--Sitharaman:Reforms, debt mgmt, fisc discipline can't always be wished away 

NEW DELHI – It is important that states play an active role in various reform measures, including debt management, Finance Minister Nirmala Sitharaman said on Thursday. "It is important for India to perform better but it is not as though it is doing it in a separate cloud cuckoo land, it is part of India's larger economy that takes you forward. Reform, therefore, cannot be just an agenda for the Union government, it has to be taken seriously by every state government," Sitharaman said at Business Standard's Manthan event.

 

"Our domestic politics can say many things, but reform is something which we will have to continue doing. Debt management, fiscal prudence cannot always be wished away in the name of we have issues...basic discipline will have to be there for an economy," she said.

 

Earlier this month, Sitharaman had urged state governments to focus on lowering their debt burden. The Union Budget for 2025-26 (Apr-Mar) has set a glide path for the Centre to bring down its debt-to-GDP ratio. The Centre is set to cut its debt-to-GDP ratio to 50.0% in a band of 49-51% by FY31 from 57.1% in FY25.  

 

After the Budget was presented on Feb. 1, Fitch had said that clarity on the medium-term debt reduction path was a positive development and sticking to it "could improve the credit profile (of India) over time". However, the other two major global rating agencies were not as convinced. Moody's Ratings warned the projected improvement "may not be sufficiently material to change our broader assessment that India's fiscal strength will remain weaker than most of its Baa-rated peers". S&P Global Ratings said the decision to lower the debt-to-GDP ratio might not necessarily improve the country's debt burden score.

 

Over the last few years, political parties have promised a number of populist measures to sway state elections. Various women-centric welfare schemes are likely to put a strain on states such as Maharashtra and West Bengal.

 

Sitharaman said there should be competition among states to show that their economy was better than other states. "State governments today realised what it is to meet with industry and investors, they spend a lot of time planning for it and carry forward that agenda so that investors feel attracted to go to their states," she said.

 

The issue of overlapping regulations, she said, needs to be addresses and the FY26 Budget was a step in that direction. In the FY26 Budget, Sitharaman announced several initiatives to enhance regulatory framework and coordination across multiple sectors. This will create a more efficient, transparent and business-friendly regulatory environment to support sustainable economic growth, she had said. As part of the regulatory reforms, the Budget proposed to update outdated regulations under a "light-touch" framework, simplifying compliance requirements, reducing bureaucratic challenges, and fostering innovation and growth across industries.

 

The Economic Survey for FY25 had stated that India would need to improve its global competitiveness through grassroot-level structural reforms and deregulation to reinforce its medium-term growth potential.

 

Sitharaman said, "For the financial sector again, between the various ragulators, we needed greater coordination and greater understanding of how each one is approaching an issue."  End

 

Reported by Sagar Sen and Krity Ambey

Edited by Avishek Dutta

 

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