India pledged to put the economy back on track to fiscal consolidation (FM Nirmala Sitharaman)
The Indian government remains committed to putting the economy on the path of fiscal consolidation in the short to medium term, setting the target of reducing the budget deficit to 4.5 percent by 2025-2026, the IMF told the IMF. Union Minister of Finance, Nirmala Sitharaman.
Speaking to the International Monetary and Financial Committee here, Sitharaman said the Indian government is ready to provide additional capital to public sector banks (PSBs) when needed and that the trajectory of inflation is also moving more favorably. provided that.
To attend the annual meeting of the International Monetary Fund and the World Bank, she said that as accommodative fiscal policy is maintained in the short term to support the economy, the government remains committed to bringing the economy back to normal. the way of budgetary consolidation in the near to medium term.
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“The Union government’s budget deficit is budgeted at 6.8% of GDP (gross domestic product) for the current year and will be reduced to 4.5% of GDP by 2025-2026. Next year’s budget will contain medium-term macroeconomic projections and include a review of the law on fiscal responsibility and fiscal management [FRBM],” she said.
Revenue mobilization would be a key element of the medium-term fiscal strategy. Streamlining with electronic invoicing, Goods and Services Tax (GST) audits, closer scrutiny of returns, and streamlining of rates are all expected to increase GST revenue; Streamlined corporate tax rates are also expected to improve tax compliance and fiscal dynamism, she added.
Divestment focused on the privatization and monetization of sovereign assets would also support the consolidation process, the finance minister said.
The surge in investment spending on infrastructure, including projects on health, education and skills development, will continue. The increase in public investment in infrastructure is expected to attract private investment and increase potential output and growth in the medium term, she said.
Stating that India’s banking system remains well capitalized, the finance minister said stress tests undertaken by the Reserve Bank of India (RBI) revealed that planned commercial banks would have sufficient capital even in a severe crisis scenario.
“In addition, the government is ready to provide additional capital to public sector banks when needed,” she said.
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The RBI has continued to maintain an accommodative stance with repo rate cuts, liquidity measures amounting to 8.7% of GDP, and has taken more than 100 measures since the start of the Covid-19 pandemic to support sectors, institutions, instruments and has ensured favorable financial conditions to support the revival of growth, she said.
“[The] The RBI has also indicated that it will continue its accommodative monetary policy for as long as necessary to revive and support growth on a sustainable basis while ensuring that inflation remains on target, ”the minister said.
Aggregate demand is strengthening, while on the supply side, indicators reflect improving industrial activity and service sector indicators point to a sustained recovery.
The IMF predicts that India’s GDP will grow 9.5% in 2021-2022 and 8.5% next year.
“As early indications from the high-frequency indicators suggest, India is on track to meet these growth projections and become the fastest growing large economy in 2021-2022 and beyond. The inflation path is also moving down more favorably than expected, ”Sitharaman said.
“As pandemic scars heal and supply conditions are restored with productivity gains, a sustained slowdown in core inflation can be expected, which will strengthen the favorable monetary policy stance. to growth, “said the Minister of Finance.
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