Finance minister Nirmala Sitharaman said the Centre hadn’t been surprised by the Reserve Bank of India (RBI) raising interest rates this week and doesn’t see the move affecting the government’s infrastructure investment.
“It is the timing which came as a surprise to many, but the act people thought should have been done anyway — to what extent could have varied,” she said at The Economic Times Awards for Corporate Excellence that was held in Mumbai on Saturday evening. “It came as a surprise because it came between two monetary policy reviews.”
She noted that in the April policy review, RBI had indicated that it was time to act on inflation.
Sitharaman was presented with the ET Award for Business Reformer for having guided the Indian economy through the most turbulent times in recent history, at a glittering ceremony attended by top ministers and bureaucrats as well as the cream of the Indian industry.
RBI raised interest rates for the first time in more than three years on May 4, following an unscheduled policy review to rein in prices.
The finance minister also said it makes perfect sense to buy oil from Russia if it’s being offered to India at a discounted rate, particularly with inflation on the rise globally. “I thought we have been spending a lot of time explaining India’s position, not just on the abstentions (on Ukraine) when voting took place (at the United Nations), but also on the fact that if Russia is offering it to us at a discounted rate, we will still be buying it because it makes perfect sense, particularly when the world is stressed out with inflation,” she said.
Best Interests Amid Inflation
Sitharaman said this was in the best interests of the nation when commodities prices are sending inflation higher. “I think we’ll go ahead with what is good for the country. We need cheaper fuel. If it is available, why won’t we want to buy it? We will buy it,” she said.
The finance minister observed that she sees a greater understanding among central banks worldwide and that inflation in India isn’t as much as it is in the US or the UK.
“But still the challenge of recovery versus inflation seems to be following a particular template across the globe,” she said, adding that understanding how to handle the post-pandemic recovery is, therefore, not unique and typical just to India.
Sitharaman ruled out any major decision on rate rationalisation at the next Goods and Services Tax (GST) Council meeting. “I want the media to please absorb everything that I’m saying — it’s not happening in the next meeting obviously,” she said.
Once the rate panel’s report on the issue was completed, it will be circulated in the council for discussion. “I would think that the committee’s report itself is not before me,” she said. “It is too presumptuous for me to think it’s going to happen in the next meeting.”
Food, Fertiliser Subsidy
The food subsidy programme will continue as long as it’s needed.
“We did understand that till such a time as we are confident (of) recovery and are confident that the poor are able to stand up for themselves and earn their livelihood comfortably, we wanted to extend the food programme, for which the outer understanding of our limit (is) Rs 2.1-2.2 lakh crore. In a way, that calculation has been in our minds, and even during the budget preparation, that was well in our consideration zone,” she said.
The government is conscious the fertiliser subsidy may rise even this year, so farmers aren’t burdened. “So, to an extent, we were prepared for an additional allocation both for the (Pradhan Mantri Garib Kalyan) Anna Yojana and also for the fertilisers,” Sitharaman said.
The minister said India’s stance on taxing crypto assets has been appreciated by multilateral agencies.
“The concern in the IMF (International Monetary Fund) and in multilateral institutions is that because there is not enough regulatory mechanism, cryptos should not end up violating those FATF (Financial Action Task Force) norms,” said Sitharaman. “India took a step forward by taxing the crypto transactions and has been well received… they see it as an out-of-box solution to tracking the money.”