"Inflation Exists, But Look At What Levels": Nirmala Sitharaman Targets Opposition On Price Rise Debate

Finance Minister Nirmala Sitharaman initiated her reply to a debate on price rise in the Lok Sabha on Monday (1 August) by claiming that her reply was going to be political because the allegations made by the opposition parties were political too.

Here are the highlights from the speech:

1. India and the rest of the world: She said, "Despite our growth projections being lowered, we remain the fastest growing economy... Due to the steps taken by the government and the RBI, we remain much better than most countries."

"GDP of the US fell 0.9 per cent in the second quarter after 1.6 per cent decline in the first quarter, marking the start of an unofficial recession," but "there is no question of India getting into a recession or stagflation," she further said.

She quoted a Bloomberg survey that said that there is zero possibility of India slipping into a recession, whereas several major economies are in a risky position of getting into the recession.

"4,000 banks in China are reportedly on the verge of going bankrupt. In India, the gross non-performing assets (NPAs) of scheduled commercial banks has hit a six-year low of 5.9 per cent in FY 2022," she claimed.

"The debt to GDP ratio of many countries are in triple digits including Japan, Greece, Italy, Singapore, US, France, Sri Lanka and Canada, whereas for India it was at 56.29 per cent of the GDP at the end of 2021-22," she further said.

She quoted IMF data on general government debt (which includes centre and states) and claimed that India is in a "far better position than its peers with a general debt to GDP ratio of 86.9 per cent."

2. Economic parameters: "We have garnered the second highest level of GST collection since its inception with 1.49 lakh crores in July 2022. This is the fifth consecutive month with collections above 1.4 lakh crores," Sitharaman claimed.

She said that Manufacturing Purchasing Managers' Index is at its eight-month high at 56.4 for July, which indicates that "the trends for output and new orders are strengthening, so the economy is getting even more robust."

She conceded that inflation exists but claimed that the government had held it well within 7 per cent, and that needs to be recognised. "Retail inflation was more than 9 per cent in 22 months and went in double digits nine times during the UPA rule," she said while targeting the opposition.

3. Quoting Raghuram Rajan: She said that while the opposition often quotes former RBI governor Raghuram Rajan for criticising the government, she will also quote him from his Saturday (30 July) statement.

"RBI has done a good job in increasing foreign exchange reserve of India, insulating India from problems being faced by neighbouring countries like Pakistan and Sri Lanka... New Delhi is less indebted which is a good sign," Sitharaman quoted Rajan.

On inflation, she quoted him, "At present, there is inflation all over the world. RBI is increasing interest rates which will help in reducing inflation. Most inflation is in food and fuel. As we can see, food inflation is coming down in the world and will decrease in India also."

4. Measures taken by the government: "Central government has reduced customs duty on crude palm oil from 35.75 per cent 5.5 per cent," Sitharaman highlighted the government's effort to bring down food prices.

She also told the parliament that customs duty on sunflower and soyabean oil had been reduced drastically from 38.5 per cent to 5.5 per cent. For further lowering of edible oil prices, TRQs (tariff-rate quota) for nearly 20 lakh metric tonnes of sunflower and soyabean oil have been made nil, she said.

"The prices of edible oil have corrected sharply in June compared to May with a maximum decline of 18.1 per cent in palm oil prices, whereas sunflower oil, soyabean oil, groundnut oil, mustard oil and vanaspati have also seen correction in the range of 1-7 per cent in the last one month," she said while highlighting the impact of government's measures.

She brought out to notice that customs duty on masoor dal, which was upto 30 per cent on imports, has been made zero. Similarly, customs duty was rationalised for steel and copper scrap, exempted for iron and steel scrap, coal, met coke, coking coal and ferro nickel for benefitting MSMEs, she informed.

"In textile, customs duty on key raw products like nylon chips, nylon yarn and caprolactam havs been rationalised and dumping duty was revoked on raw materials like viscose fibre and other fibres and yarn. Customs duty on raw cotton has also been fully exempted," she said.

5. Comparing with the neighbouring countries: Sitharaman targeted those MPs who used to quote Bangladesh's economic figures to demean India and said, "Bangladesh is demanding a loan of $4.5 billion from IMF because they are facing balance of payment problem."

"Sri Lanka is asking IMF for $3.5 billion. Pakistan is in total asking IMF for $7 billion. India has complete reserves, our macroeconomic fundamentals are perfect," she further said.

6. Other positives: She said that the opposition suggested printing more money and credited this for the increased liquidity, however, the truth is that the currency-in-circulation to GDP ratio was 22 per cent in 2018-19, 27 per cent in 2019-20, 29 per cent in 2020-21 and 26 per cent in 2021-22.

"Whereas, this data for the US stands at 20 per cent in 2018-19, 19 per cent in 2019-20, 35 per cent in 2020-21 and 38 per cent in 2021-22. For the Eurozone, it is, 39 per cent in 2019-20, 42 per cent in 2020-21 and 67 per cent in 2021-22. We targeted benefits," she further said.

She quoted Deloitte's survey on GST, which said that 90 per cent of industry leaders feel that GST has made doing business easier by bringing down barriers across the country and GST regime has positively affected prices and cost of goods and services to end consumers, along with helping companies to optimise their supply chains.

The Emergency Credit Liquidity Guarantee Scheme has saved 13.5 lakh MSMEs' worth 1.8 lakh crore rupees from slipping into becoming NPA, she said while quoting SBI research, which is equivalent to 14 per cent of the outstanding MSME credit being saved from becoming NPA.

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