Opposition points to inflation, loss of jobs; FM Sitharaman says there is no recession or stagflation
Responding to a discussion of rising prices in Lok Sabha, Sitharaman criticized the opposition for comparing the country’s economic conditions with neighboring countries like Sri Lanka, and said India was in a much better position. because its “macroeconomic fundamentals are perfect”.
“If we talk about India’s economy, then we have the fastest growth despite all the challenges – global challenges and national challenges,” she said.
Sitharaman also quoted former RBI Governor Raghuram Rajan and said that the Reserve Bank of India had done a “very good job of increasing foreign exchange reserves in India, insulating it from the problems faced by the countries neighbours, such as Pakistan and Sri Lanka.”
The opposition, however, attacked the government, blaming it for widening inequalities with rising prices and failing to create jobs.
Congress accused the government of failing in the fundamentals of the economy. The TMC said government policies had left people with no money to even buy LPG cylinders. Dissatisfied with Sitharaman’s response, the Congress and DMK deputies left the House.
Earlier, responding to Congress Leader Adhir Ranjan Chowdhury who was questioning whether India was heading towards stagflation, Sitharaman said, “There is no way India is going into recession or stagflation.”
Observing that banks and their health are equally important to the economy, Sitharaman said: “In India, gross non-performing assets of regular commercial banks are at a six-year low of 5.9% over the financial year 22. Thus, in China, 4,000 banks are on the verge of failure and our NPAs are improving.
She said the debt-to-GDP ratio of many countries, including the United States, is in triple digits while it is 56.29% in India. “India is in a much better position than its peers…The Indian economy is showing very positive signs,” Sitharaman said.
“First of all, as Indians, we have to understand that our people have gone through this pandemic… But despite this, due to the various measures taken by the government and also by the Reserve Bank of India, we are much better than most countries. ,” she says.
“I recognize that everyone – MPs and State Governments – have all played their part otherwise the India of today will not be where it is compared to the rest of the world. So I give full credit to the Indian people…we are recognized as the fastest growing economy and that is not my assessment,” she said.
At the start of his lengthy response which lasted an hour and 40 minutes, with frequent interruptions from the opposition, Sitharaman said: “I find it to be more of a discussion of the political angles of rising prices than concerns based on price data. Therefore, I try to make my answer a bit political.
Comparing the inflation figures under NDA rule with those of the Congress-led UPA government, Sitharaman said, “We have kept inflation well at 7 or below. Retail inflation was above 9% for 22 months during the UPA… Inflation was in the double digits nine times over. In 2012-2013, the consumer price index was 10.05% while it was 6% in 2020-2021, she said.
Sitharaman also denounced Congress for issuing oil bonds during his rule. In principle, the decision to issue oil bonds was wrong, she said, adding that the culture of giveaways must end.
Observing that duties on crude palm oil have been reduced from 35.75% to 8.5% and now 5.5%, Sitharaman said, the government has significantly reduced duties so that oil prices edible oil may decline.
Striking opposition for comparing India with neighboring Bangladesh and Sri Lanka, Sitharaman said, “India is better than Sri Lanka and Bangladesh… Today Bangladesh is asking for a loan of 4.5 billions of dollars to the IMF. Sri Lanka claims 3.5 billion dollars. Pakistan is asking for $7 billion. India’s condition is not like that…India’s macroeconomic fundamentals are perfect…Compare with the US. What are Bangladesh and Sri Lanka.
Responding to the opposition’s demand for a reduction in GST on food items like milk, curd and rice, Sitharaman said, “This issue has been discussed in detail in the GST Council. All the Ministers of State were present. There was no vote and the decision was made by consensus.
The Minister of Finance clarified that the GST was only collected on pre-packaged and labeled items, not on items sold in bulk.
She said the decision to impose the GST on these items was taken at three levels, the Adjustment Committee, the Ministers’ Group and the GST Council, and pointed out that state representatives headed by the opposition had participated in the process.
None of them dissented, she said, adding that the GST was only levied on branded food products to curb revenue leakage.
She also highlighted the existence of VAT on food items such as pulses in various states including Punjab, Tamil Nadu, Telangana, Andhra Pradesh and Jammu and Kashmir.
“To those who talk about the GST, I want to tell them with folded hands that the GST Board is a constitutional body in which all the States and the Center sit together and in which decisions are not made by (the Prime Minister Narendra) Modiji. Decisions are made by finance ministers of all states. They should speak the truth in their states. But they don’t,” Sitharaman said.
The Union Finance Minister also clarified that there was no GST on burial and crematorium services. On the issue of GST compensation, she said that only one month of compensation (for June 2022) is pending for states.
In his speech, Congress Leader Chowdhury accused the government of helping businesses. “The Modi government is only for two people,” he said, adding that “two-three companies” engage in “looting” while “the poor are forced to live in darkness.”
In response, Sitharaman pointed out that the Congress government of Rajasthan had allocated 2,397 hectares of land to an Adani company. She said the Rajasthan government signed a memorandum of understanding with an Adani company just a day after Congress leader Rahul Gandhi accused the government of favoring Adani and Ambani.