Govt keeping close eye on inflation; targeted approach averted recession: FM

Finance Minister Nirmala Sitharaman on Wednesday said the government is keeping a close watch on inflation to ensure there is no surge in prices, and highlighted the targeted approach in pulling out the economy from pandemic disruptions without slipping into recession.

She also expressed confidence that the fiscal deficit will not breach the target because of enough revenue buoyancy to take care of additional expenditure of Rs 3.25 lakh crore in 2022-23.

The minister was replying in Rajya Sabha to a discussion on first batch of Supplementary Demands for Grants for 2022-23. The supplementary demand for grants was later returned to Lok Sabha, thus authorising the government to spend an additional Rs 3.25 lakh crore over and above the funds approved in the Union Budget.

Sitharaman said the supplementary demands for grants is essentially for meeting expenditure towards food security and fertiliser subsidy, and providing support to the Indian economy.

While participating in the debate, former finance minister and Congress veteran P Chidambaram wanted to know from the government how it plans to fund the additional spending.

"In September itself, government made it clear that we aren't changing our borrowing schedule and borrowing plans... There's enough revenue buoyancy which gives me confidence that we will fund this supplementary demands without breaching fiscal deficit target," Sitharaman said.

The government borrows from the market to bridge the gap between expenditure and revenue. In the Union Budget 2022-23, the government had announced to keep the fiscal deficit at 6.4 per cent of the GDP.

Sitharaman, who is scheduled to present the next Union Budget on February 1, said, "because of the targeted approach in which the government decided to give relief during Covid and address concerns given as inputs from various stakeholders, it has kept India on safe course of revival and also not getting into recession".

Further, she said that some large economies are facing recession because of the approach they had adopted to deal with challenges of the pandemic.

"'Borrow and spend and even print money to reboot the economy was the suggestion by a former finance minister and others during Covid. As we close 2022, we should look at the negative effect of use of this suggestion by other countries, which have gone into recession," she said.

Referring to the price situation in the country, she said, "we are keeping a good eye on inflation like considerations" which are purely extraneous nowadays, because of the fuel and fertiliser crisis in the international market.

On remarks made by Raghav Chadha during the debate on Tuesday, the minister said the AAP member, who is a qualified accountant, "should look into numbers before he speaks".

"He said inflation is high and in double-digit. He should notice that WPI inflation is at 21-month low of 5.85 per cent. Wholesale food inflation is at 2.17 per cent," the minister said.

In response to several members saying that there is a lack of private sector investments in recent years, Sitharaman said that private sector capex is happening because of the favourable policies of the government like PLI schemes.

The minister also cited announcements made by corporate houses regarding their capital expenditure, and reports by analysts to buttress her point.

Citing a report of an equity research firm, she said said private sector capex announcements are up 35 per cent year-on-year and 53 per cent above pre-Covid levels.

In an apparent reference to Punjab government, she said media reports have recently highlighted that one state government is unable to timely pay salaries of its employees, and they are protesting.

"It is perhaps because funds are being used in giving numerous full-page advertisements in newspapers," she said.

The minister stressed that subsidies and freebies should be contextualised.

"If you are able to put it in your budget, make provision for it, no one will have any objection," Sitharaman said and added education, health and farmer subsidies are justified.

"All we want is transparency and compliance with fiscal rules," she said.

Sitharaman also took exception to Raghav Chadha's remarks that Aadhaar card has become Udhar card, saying small borrowers should not be mocked at because they use the unique identification number as a KYC document in banks.

On allegations of the government working for big corporate houses, Sitharaman said the Modi-government works on 'development of all and appeasement of none' principle.

"We believe in 'Sabka Sath Sabka Vikas'. Are schemes like Jan Dhan, JAM Trinity, PM Ayushman, Ujjawala, Ujala, PMGKAY, etc, which benefit common people, meant for corporates?," she quipped.

Of the net additional spending of over Rs 3.25 lakh crore, approved by Parliament, Rs 1.09 lakh crore will go for fertiliser subsidy payout and Rs 80,348.25 crore for meeting expenditure of the food and consumer affairs ministry (mainly for giving free food grains to the poor).

An amount of Rs 29,944 crore will be spend towards payments of LPG subsidies to oil marketing companies and LPG connections to the poor under the Pradhan Mantri Ujjwala Yojana.

The additional expenditure also includes Rs 13,669 crore and Rs 12,000 crore for meeting spending requirements of telecom and railways ministries, respectively. Around Rs 10,000 crore will be for transfer to GST compensation fund, and Rs 46,000 crore for additional expenditure by the Rural Development Ministry.