NEW DELHI: The Indian economy could navigate through serious global challenges such as Covid-19 and surging inflation due to the Ukraine war because of its strength thanks to policy measures undertaken before the pandemic hit in March 2020, finance minister Nirmala Sitharaman said on Wednesday.
She said the measures included banking reforms, corporate tax reduction, digitalisation, implementation of the Goods and Services Tax (GST) and of the Insolvency and Bankruptcy Code (IBC). Many of these steps were taken after 2014 and before the pandemic.
Sitharaman, who was speaking at the Iconic Day Celebrations under the Azadi Ka Amrit Mahotsav, said the government took some of these “major steps” without having any idea of the impending challenges, first Covid-19 pandemic followed by a spike in inflation globally due to supply-chain disruption because of the Ukraine war. “The heavy lifting, which actually happened [before the challenges], prepared us for a situation which no one could imagine.”
Sitharaman said economic challenges have been cyclic and occur often in a decade or 15 years. Every government had to face these challenges and pull the country out of it, she added. She said the country faced challenges in 1991 when the government took steps to avert the crisis so that the economy was revived again. “So was the situation in 2013-14. The Modi government faced the challenges and pulled the economy out of it again. But new challenges came again in the form of the Covid-19 pandemic in 2020.”
The finance minister said the resilience of India amid the economic crisis faced by the world has been recognised globally. She cited the three key policy measures that received global appreciation – the Prime Minister Garib Kalyan Yojana (PMGKY) for free dry ration to 800 million poor every month, the ₹4.5 trillion sovereign-guaranteed credit facility to small and medium businesses called Emergency Credit Line Guarantee Scheme (ECLGS) and the Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (AB-PMJAY).
Citing a global consultant’s survey report, she said PMGKY reduced the probability of people cutting down consumption of utilities by 75% despite the pandemic. The report also showed that the PMGKY reduced the probability of borrowing money by 67% of beneficiaries covered by the survey.
She said under ECLGS, as of March 2022, over ₹3.19 lakh crore loans have been sanctioned and the scope of the scheme is extended till 2023. Quoting another report on the health scheme (Ayushman Bharat), she said its implementation led to about a 21% decline in out-of-pocket health expenditure and an 8% reduction in the tendency to borrow for emergency health purposes.
She said digitisation made delivery of goods and services easy and helped the government’s Covid-19 vaccination programme. “No other country had a systematically developed [such digital] platform,” she said. “We are moving forward. We are showing the way in digitizing the economy.’
Sitharaman credited people’s active participation for the success of government policies to strengthen the economy. “Every challenge has been met with the participation of people and as a result of which we are seeing that collective synergy resulting in such great advantages…,” she said.
She said when the government adopts a targeted approach of providing assistance and takes the input from the ground and does so quickly, in time and in an open fashion, the impact is for all to see.
She said the digital system is keeping track of the government’s expenditure for effective and efficient utilisation of public money.
The finance minister on Tuesday launched the Single Nodal Agency (SNA) Dashboard that tracks the effective utilisation of about ₹4.50 lakh crore money the Union government sends annually to states for implementing centrally sponsored welfare schemes.
She concurred with chief economic adviser V Anantha Nageswaran’s assessment that India will be a $20 trillion economy by 2040 with per capita income of close to $15,000. Earlier, speaking at the same event, Nageswaran said the fundamentals of the Indian economy are strong but for some external headwinds such as pandemic and geopolitical conflicts, which might “temporarily” overshadow the growth of the economy.
“That is why India is now forecasted by the International Monetary Fund (IMF) to cross $5 trillion by 2026-27 and if the dollar GDP of the country doubles every seven years, we will be at $20 trillion GDP by 2040 with the per capita income of close to $15,000,” he said.
Endorsing Nageswaran’s view, Sitharaman said that would be the result of both the Centre and states moving on the reform path. She urged officials to increasingly use technology for transparency and ease but cautioned unscrupulous elements. “There cannot be any accommodation of people who want to game any system. India has to set a very high benchmark.”