Finance Minister Nirmala Sitharaman on Tuesday said the Indian economy, especially the rural India, is on the path of recovery and that the government is ready to take more steps to support the industry if necessary.
“We have kept all options necessary absolutely open. Government is willing to participate, talk to everybody and see what best has to be done. Interventions can happen even in future depending on how the industry responds to us,” Sitharaman said at the 2020 India Ideas Summit organized by the US-India Business Council (USIBC).
Speaking after Sitharaman at the same event, economic affairs secretary Tarun Bajaj said government will extend the production linked incentive (PLI) it announced in March for electronics production to some more sectors soon. The scheme worth ₹50,000 crore announced by the electronics ministry offers an incentive of 4-6% on incremental sales of goods manufactured in India. “We are also looking at some other sectors in PLI which we will come out with soon,” Bajaj added.
Sitharaman said though various figures are floating around about the extent of contraction Indian economy may face in FY21, she can see revival, particularly in rural India. “We have had a very good summer crop. All of what were necessary, have been procured at reasonable price so that farmers are not left high and dry looking for purchasers. Now the estimate for kharif crop has also come. We can clearly see agriculture sector is driving the revival. Activities related to rural economy—whether it is tractor sales, agriculture tools, logistics dealing with food sector, all are up and above. If we can synchronise between the movement between those who monitoring the economy, the regulators, the financial sectors if all work together, a very strong recovery is before us,” she added.
While Indian economy had started recovering after the nationwide lockdown was lifted in June, many analysts say the unabated rise in covid-19 infections in the ‘Unlock’ phase and localised re-imposition of lockdowns in several states have interrupted this recovery in recent weeks. ICRA Ratings last week revised downward its forecast of contraction for Indian economy in FY21 to 9.5% from 5% earlier over growing uncertainty on the recovery path. “Given the severity of the pandemic and the duration of the safety measures that need to be employed, we now expect a deeper pace of GDP contraction in Q2FY21 relative to our earlier forecast. We also anticipate more unevenness, as different regions move in and out of lockdowns, and persisting labour supply mismatches affect supply chains and consumption patterns. We have also tempered our expectations regarding the extent of fiscal support that may be forthcoming, given the revenue shock being experienced by various levels of governments,” it added.
Sitharaman said the financial package announced by the government amounting to 10% of GDP has also had a positive impact on the rest of the economy. “Indicators that are before us, such as power consumption, toll collection, bank digital transactions have improved. Stimulus that we gave which touched 10% of GDP made a big difference for companies to come out of the effects of lockdown. With all this I hope the Indian industry together with the government will deliver a good, speedy and sustainable recovery post the pandemic,” she added.-Live Mint