Growth may have come down, but no recession yet: FM

The Centre Wednesday assured that India does not face any recession threat although the economic growth may have slowed down to a level not seen since 2013.

“Economic growth may have slowed down but there is no recession. There can be no recession,” Finance Minister Nirmala Sitharaman said, in a much-needed psychological relief to investors and other stakeholders in the Indian economy but did not give any concurrent data to support her argument.

The minister said this while replying to a short-duration discussion on India's economic situation in the Rajya Sabha.

Her assurance came two days ahead of the official July-September (2019-20) economic growth numbers on Friday. The estimates are that the GDP growth could even fall to 4% in the quarter under review.

Technically, recession occurs when the economy suffers two consecutive quarters of negative GDP growth. Though India is far from recession at present, its growth has slipped precariously close to the Hindu rate of growth that the country experienced in between the 1950s and 1980s, when the economy stagnated around 3.5% growth.

The Indian economy expanded 5% in April-June, its slowest annual pace since 2013. Despite the Reserve Bank of India and the Centre announcing a host of measures since the beginning of the year, the needle has not moved much the growth side and joblessness too is rampant.

Among the measures, the government has announced since July are a corporate tax rate cut, recapitalise the public sector banks to enhance lending and withdrawal of higher taxes on foreign investors.

The RBI, on its part, has handed out a 135 basis point cut in the key interest rates to spur lending. However, neither the bank credit growth has picked up nor there are new investments in major sectors.

Under attack from a united Opposition for falling to spur the economy and create jobs, the minister mostly reeled out data from the UPA-II and compared the same with the NDA-I, seeking to prove that the GDP growth numbers, tax collection, fiscal deficit, tax to GDP ratio and FDI inflows performed better in the first term of Prime Minister Narendra Modi-led government.

Her comparisons, however, appeared out of context as the current economic slowdown had little to do with the numbers of the last 10 years. The Opposition parties, including Congress and the Trinamool, staged a walkout from the House midway the minister's reply after blaming the government that it was not ready even to accept that there was a problem in the economy, let alone offering a solution.

Earlier while initiating the discussion, Congress member Anand Sharma said demonetisation wrecked the unorganised sector and the government's hasty implementation of the "complex GST" exacerbated that.

The minister, however, took solace in the fact that while inflation during the first tenure of the Modi government came down to a little above 4% from double-digit figures in the UPA government, fiscal deficit halved during the same period, foreign exchange reserves saw a significant rise and FDI inflows improved to $283.9 billion in 2019, from $189.5 billion in 2009-2014.

During the discussion, TRS member K Keshav Rao said the government should hang its head in shame as the agriculture growth in the country had come down to 1.2% lately.