FM allays inflation fears over economic growth
NEW DELHI: Finance minister Nirmala Sitharaman on Monday allayed fears that inflation could hamper India’s economic growth, pointing out that the government is constantly monitoring prices of essential commodities, and added that ministries have been told to frontload the ₹5.54 lakh crore capital expenditure (capex) budgeted in the current financial year to boost the economy.
On capex, she said, the only message given to ministries and departments is to “spend and spend at the earliest.” There is no cut in capex and ministries have been asked to spend the fourth quarter (Q4) budget in Q3 and third quarter budget in
Q2 to accelerate growth. Their expenditures are monitored closely, she said.
India’s retail inflation in July was 5.59% after staying above 6% for two consecutive months. The Reserve Bank of India’s inflation target is 4% with the upper tolerance limit of 6%and the lower tolerance limit of 2%.
High fuel prices have some inflationary impact. The weightage of petrol and diesel in the WPI index are 1.60% and 3.10%, respectively, and in the CPI index, 2.19% and 0.15%. Wholesale inflation has eased to 11.16% in July from a record high of 13.11% in May after food items became cheaper.
Responding to a question on high taxes on auto fuels, Sitharaman said the Modi government has inherited huge financial burden in terms of oil bonds that were issued by the Congress-led United Progressive Alliance (UPA) government and the current regime is forced to pay this. According to government data, the interest on oil bonds paid in the last seven years totalled ₹70,195.72 crore. The future interest burden on the government (from 2021-22 to 2025-26) is ₹37,340 crore. Besides, the government has an outstanding principal of over ₹1.3 lakh crore.
When asked whether this would mean the government would not cut excise duty of petrol and diesel, she said: “I’m not suggesting anything.”
Domestic petrol and diesel rates were on the rise since 4 May, a day after the results of five assembly polls were declared. The price rally saw petrol becoming dearer by ₹11.44 a litre in 41 sessions and diesel by ₹9.14 since May 4. Fuel rates jumped to historic highs and petrol crossed Rs 100 a litre mark in several places for the first time. Currently petrol is sold at ₹101.84 a litre in Delhi and diesel at ₹89.87 per litre.
Congress leader Randeep Singh Surjewala issued a sixpoint rebuttal on the issue of oil bonds, on Twitter.