Amidst preparations for the upcoming budget, Finance Minister Nirmala Sitharaman said on Tuesday that the country's next budget will have to be prepared very carefully, which will help in keeping the pace of economic growth in check with high inflation. India is currently facing the twin challenges of slow growth and high inflation. He said that high energy prices are one of the biggest problems of the Indian economy shortly.
The Finance Minister, who came to Washington DC to attend the annual meeting of the International Monetary Fund (IMF) and the World Bank, said in response to a question asked by eminent economist Ishwar Prasad at the Brookings Institute about the next year's budget, to be able to tell something specific about this. It will be too soon and it is difficult. But, broadly speaking, growth priorities will remain at the top. Inflation concerns will also have to be dealt with. But, then the question will arise that how will you maintain the growth rate? Sitharaman said, now it remains to be seen how to strike a balance between the two. Along with this, it should be ensured that the momentum achieved by the Indian economy after recovering from the epidemic, should be maintained for the next year also. Therefore, this budget will have to be prepared very carefully in such a way that the pace of economic growth can be maintained. Finance Minister Nirmala Sitharaman will present the Union Budget for 2023-24 on February 1, 2023.
Impact of global stress on our economy
In response to another question, he said that global tensions are affecting the Indian economy. Due to this tension, the prices of energy, fertilizers, and food items have increased. We are keeping an eye on this and we are also making sure that it does not put pressure on people. He said excise duty on fuel was cut so that Indians do not have to bear the brunt of rising prices.
India imports 85% of its oil requirements. Due to the dependence on imports, fluctuations in fuel prices in the global market have a direct impact on India.
"This imported inflation is putting pressure on prices on the domestic front," he said.
The central bank has projected a growth rate of 07 percent for 2022-23.
Retail inflation has been outside the RBI's high range for the 9th consecutive month.
Tightening monetary policy is the right decision of the central bank: IMF
IMF praised RBI for tightening monetary policy to control inflation in India. García Pasqual, Deputy Division Head in the Monetary and Capital Markets Department of the Monetary Fund, said, "The RBI has tightened monetary policy to deal with inflation that has remained above the set limit since May. I note that RBI has increased the repo rate by 1.90 percent. We believe that more strictness will have to be done to bring inflation down to a certain level.
Tobias Adrian, the financial advisor at the IMF and director of the Monetary-Capital Markets Department, said, "Because of inflation, the RBI will further tighten monetary policy going forward."
Weakness in the banking system is a matter of concern
On the financial stability front, Adrian said that there are already some weaknesses in the banks and non-banking systems in India. It's a topic of concern We had raised these issues in the Financial Sector Assessment Program in India sometime back. Some of these issues persist in India.
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India's debt to gross domestic product (GDP) ratio is estimated to be 84 percent this year. It is higher in many emerging economies. However, the good thing is that India's debt is such, which is not a big problem to handle.
IMF Deputy Director (Fiscal Affairs) Paulo Mauro said, it is important for India to have a clear medium-term target on the fiscal front. Many things are not clear about the steps taken to keep the fiscal position stable
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