Nirmala Sitharaman allays growth dip worries, moots rate cut

Union Finance Minister Nirmala Sitharaman addresses concerns about economic slowdown, advocating for lower interest rates and addressing inflation risks.

Seeking to quell anxieties about a slowdown in the economy, Union Finance Minister Nirmala Sitharaman on Monday asserted that the government was fully aware of domestic and global challenges and there was “no cause for undue concern”.

Ms. Sitharaman batted for lower interest rates to spur private investments while acknowledging that perishable vegetables continue to pose an inflation risk.

Acknowledging that there has been moderation in some economic indicators, Ms. Sitharaman, however, brushed them aside and said India’s economy remained resilient, underpinned by strong macroeconomic fundamentals, moderating inflation, robust external position, and continued fiscal consolidation that have reinforced confidence among both consumers and businesses.

“I need to address the concerns arising from recent signs of moderation in certain economic indicators. The concerns are there… Whilst I acknowledge the remarkable growth trajectory and promising prospects of the Indian economy, it is also important to address the concern… let me assure you that the government is fully aware of the challenges posed by domestic and global factors,” the Minister said at the SBI Banking and Economics Conclave.

The remarks assume significance in the light of slackening momentum in the economy, marked by faltering urban demand and weak corporate results for the second quarter that some economists have even posited as a “cyclical slowdown”.

“There is no cause for undue concern. Recent high frequency indicators also reflect sustained growth momentum. Record e-way bill generation, buoyant trends in rural demand, and strong PMI data for manufacturing and services underscore the steady pace of economic activity,” she said.

She also pointed to healthy growth in foreign direct investment inflows this year and foreign exchange reserves that “comfortably cover 11.8 months of imports and exceed 100% of external debt, underlining the strong net buffer in the Indian economy”.