September 28, 2020 4:37:01 am
Sitharaman said on Saturday that the economy continues to face challenges of a different nature with no clear end date for the pandemic, especially in the absence of a safe vaccine.
SIX MONTHS DURING the Covid-19 pandemic and a sharp 23.9 percent GDP contraction between April and June following a strict national shutdown, Union Finance Minister Nirmala Sitharaman said on Saturday that the economy continues to face challenges of a different nature with no clear ending. date of the pandemic, especially in the absence of a safe vaccine.
In an interview for The Indian Express (detailed transcript to be posted tomorrow), Sitharaman said: “Six months has not really reduced the challenges, but the nature of the challenges has changed … and the ministry is now faster than it is. it was in terms of responding. “
He said that although the figures per million and the death rate were low for a variety of reasons, including increased public awareness and caution, Covid-19 remained a major concern. From social distancing to face masks and frequent hand washing, “they are doing all of this without material change in terms of handling the pandemic,” he said.
“It doesn’t have a safe vaccine, it doesn’t have a clear end date; and with reports in some places that people who have been cured are recovering it … great uncertainties play in the minds of entrepreneurs, small and medium-sized ”, he said.
This has adversely affected economic activity, particularly the service sector, which accounts for almost 55 percent of GDP. Manufacturing sectors have slowly recovered with capacity utilization in various industries returning to pre-Covid-19 levels.
From India Inc, he said, he had deduced that migrant workers were returning to labor-intensive industries such as clothing and apparel, and that exports in certain sectors (steel, for example) were also recovering, with the pace increased demand abroad. greater than domestic demand. “This is consistent with the ministry’s own findings,” he said. The economy can be comforted by rural areas that were experiencing full-blown activity. “This is a great story … not only agriculture, but also rural non-farm activities are strong,” he said.
Broad high-frequency indicators reveal that the economy, in the past three months, has regained much of the ground lost. This is reflected in GST’s revenue, which in August was 88 percent of August 2019. Electronic transportation invoices generated in August were 97.2 percent of the value in the corresponding period last year; IHS Markit India’s Manufacturing Purchasing Managers Index (PMI) rose to a six-month high of 52 in August from 46 in July. A PMI above 50 represents an expansion compared to the previous month.
But even so, various estimates of the second-quarter GDP contraction, from 4.5% (Ficci) to 13.7% (Goldman Sachs), have led many to recommend a much greater fiscal stimulus to the Prime Minister. Between Prime Minister Garib Kalyan Yojana and AtmaNirbhar Bharat, the additional government spending has been about 1.2% of GDP. In presentations made to the Prime Minister in June-July, Niti Aayog, the office of the Chief Economic Adviser and the Prime Minister’s Economic Advisory Council, suggested additional spending of up to 4.5 percent of GDP.
While a sense of unease prevails within one section of the government over what is perceived as risk aversion, Finance Minister Sitharaman said: “No. I don’t think there will be such hesitation … Of course, I will time the stimulus. “
When asked if the challenge of defining beneficiaries was one of the reasons for the restriction, the finance minister said that with DBT (Direct Benefit Transfer), there was no need to worry about money reaching the accounts of the people for whom it was intended. Furthermore, he said that the AtmaNirbhar package, for example, was not just one, but comprised so many different things for so many different sectors. “It’s not like we announced that, and within 24 hours it sold out. Actually, it’s rolling even now, ”he said.
Referring to data, for example, on the 100% Emergency Credit Line Guarantee Scheme, Sitharaman said that public and private sector banks have sanctioned loans of 1.77.353 million rupees, of which 1.25,425 million million rupees, had already been disbursed to MSMEs and individuals.
The frontline sectors – tourism, hospitality and hotels and restaurants – most affected by Covid-19, the finance minister said, were “severely affected.” While tourism has not found resonance among foreigners (the season starts in a few weeks), domestic tourists are arriving, especially those in metropolitan cities, seeking weekend getaways after being locked up for a long time. “Within the hotel and restaurant industry, take-out is also on the rise,” he said.
When asked what was most pressing on his table as the budget exercise gets underway in two months, he pointed to the pool of more than 6,000 infrastructure projects involving an investment of Rs 111 lakh crore identified in December 2019 .
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