When Nirmala Sitharaman took over as India’s finance minister in May 2019, India’s growth rate was slowing due to a slowdown in domestic demand and private investment. The country’s GDP had been falling for consecutive quarters since the third quarter of 2016-17. The advent of the COVID-19 pandemic added to India’s woes as the country went into a stringent lockdown with effect from March 25, 2020. India saw two successive quarters of negative GDP growth, ending FY2011 with a growth contraction of 7.3 per cent. India’s health infrastructure collapsed and millions of Indians employed in its informal economy faced livelihood crises. FM was in an incredible state. Around the world, governments were loosening their pockets to put money in the hands of the people. Sitharaman was also expected to give a direct stimulus to the economy. However, his team chose a different, multi-pronged strategy – several relief packages for the weaker sections of society; helping businesses, especially small ones, sustain themselves during the crisis; And pay a lot of attention to infrastructure development to create jobs.
To this end, Prime Minister Narendra Modi announced a stimulus package of Rs 20 lakh crore in May 2020. As part of the Atmanirbhar Bharat Abhiyan, it gave tax exemptions to small businesses, free food grains to the poor and a Rs 1.7 lakh crore package for cash to the poor. Focusing on women and the elderly, and infrastructure spending. The government launched an emergency credit line guarantee scheme over and above the Credit Guarantee Trust to provide additional credit to MSMEs (Micro, Small and Medium Enterprises). This scheme has now been extended till March 2023. What Sitharaman did not believe was the pressure to waive off MSME loans. The ambitious National Infrastructure Pipeline, originally announced in 2019, received a fresh impetus including 9,335 projects and envisages an investment of Rs 108 lakh crore between 2019-20 and 2024-25. As part of its Make in India initiative, the Center also announced targeted production-linked incentive schemes to 13 major manufacturing sectors.
In August 2021, the Center announced an aggressive disinvestment and asset monetization push aimed at raising Rs 6 lakh crore. A new Public Sector Enterprises (PSE) policy was announced as part of the Atmanirbhar package for privatization of PSEs excluding four strategic sectors. Air India was eventually sold to the Tata Group and Life Insurance Corporation launched its initial public offering to raise Rs 21,000 crore.
Nilesh Shah, MD, Kotak Mahindra Asset Management, says, “Without spending money, he gave confidence to the economy and achieved the same goal.” Bank loans to micro and small enterprises (MSEs) in February 2022 12.11 lakh crore in February 2021 It rose 8.4 per cent to Rs 13.12 lakh crore from Rs, indicating minimal impact on businesses and business. The economy climbed back from its sharp decline, growing 8.5 per cent in the second quarter of FY22. However, since the growth came in at the low base of the previous year, the reality came much sooner. According to estimates by rating agency ICRA, growth slowed to 5.4 per cent in the third quarter and is likely to fall to 3.2 per cent in the fourth quarter.
FM’s troubles are also not likely to end soon. The ongoing Ukraine war, and the resulting supply chain disruption, rising prices of food items such as crude oil and wheat, have triggered inflationary impulses around the world. Inflation in India has surpassed RBI’s upper target of 6 per cent for four consecutive months till April, when consumer price inflation stood at 7.8 per cent. The RBI, which had kept interest rates low during the pandemic, was forced to raise them by 40 basis points in May, and another hike is imminent in June. On May 21, Sitharaman announced measures to pacify inflation, including a cut in excise duty on petrol by Rs 8 per liter and on diesel by Rs 6 (a loss of Rs 1 lakh crore to the exchequer). Increase in customs duties on raw materials for plastics and steel, and export duties on iron ore and steel intermediaries. These measures are expected to quell inflation, but if the EU decides to ban oil and gas imports from Russia, oil prices could rise to $150 a barrel or more, experts say , messing up all the calculations. S&P Global Ratings has already downgraded India’s growth prospects for the current fiscal to 7.3 per cent from 7.8 per cent. It is Sitharaman’s job to navigate the Indian economy through turbulent economic seas, not to announce any major policy moves that could rock the boat further.