For FM, economic revival has already started

Last Updated: Mon, Sep 16, 2019 13:32 hrs
Nirmala Sitharaman (Image Courtesy: Twitter)

New Delhi: Finance Minister Nirmala Sitharaman on Saturday said there are clear signs of revival of most of the indicators of the economy with uptick in industrial production and fixed investment after economic growth plunged to a six-year low of 5 per cent in Quarter 1.

According to Sitharaman, "there is robust FDI inflows and record forex reserves. Fiscal deficit is improving and current account deficit is contained. There is revival of fixed investments already. The IIP (Index of Industrial Production) is on an uptick and so is production of core industries. Retail inflation has been contained at under 4 per cent".

The FM is taking comforts from some greenshoots of economy recently. IIP growth in July gave some cheer amid slowdown though it may not indicate that a sustained recovery is in sight. IIP grew 4.3 per cent in July from a downward-revised 1.2 per cent a month ago, while retail inflation quickened to 3.21 per cent in August from 3.15 per cent in the previous month.

Growth in core sector activity quickened in July 2019 to 2.1 per cent, due to a recovery in the cement sector, according to official data.

The Index of Eight Core Industries had grown at just 0.7 per cent in June 2019.

However, July's growth rate is far lower than the 7.3 per cent growth registered in the same month last year. The country's foreign exchange reserves increased by USD 1.004 billion to USD 429.608 billion in the week to September 6, helped by a rise in foreign currency assets, RBI data showed on Friday.

In the previous week, the reserves had fallen by USD 446 million to USD 428.604 billion.

She said measures are being taken to improve credit outflow from banks. Also, transmission of interest rate cuts is being effected by banks, she said, adding she will meet heads of public sector lenders on September 19 to review the transmission.

Partial credit guarantee scheme for banks to buy assets of NBFCs has also been implemented, she said adding seven NBFCs have shown interest in the Partial credit guarantee scheme for banks.

The Reserve Bank of India has since February cut the benchmark interest rate by 110 basis points but banks have lagged in transmitting the lower rates to borrowers.

The government has been pressing banks to link borrowing rates to an external benchmark to speed up the transmission of rate cuts which is slowly but surely happening.

India's GDP growth decreased for the fifth consecutive quarter in April-June 2019 to 5 per cent, the lowest in six years on the back of faltering domestic demand, with both private consumption and investment proving lacklustre.

Government so far has announced support for the automobile sector, removal of surcharge on FPIs, and additional liquidity support for NBFCs. Accompanying structural reforms included a further easing of the foreign direct investment (FDI) regime and consolidation of the public banking sector by merging 10 PSU banks into 4.