Finance minister hints at another round of stimulus package in FY21

  • Sitharaman was speaking at the virtual launch of the autobiography of 15th Finance Commission chairman N.K. Singh, titled 'Portraits of Power: Half a Century of Being at Ringside'
  • Last week, expenditure secretary T.V. Somanathan said though nothing is planned yet, another stimulus cannot be ruled out.

Finance minister Nirmala Sitharaman on Monday said the government has not closed the option of a third stimulus package in the current financial year ending 31 March, 2021, a week after announcing demand measures to boost consumer spending and capital expenditure in the economy.

“I have not closed the option for another stimulus package if it comes out to be, because every time we announced one, it has been after a lot of consideration of inputs which have come from various different sections of the society. Then we sit and work it out within the ministry and prime minister’s office and then take a final call. So I have not closed the option to come up with one more stimulus," Sitharaman said participating in a panel discussion at the virtual launch of the autobiography of 15th Finance Commission chairman N.K. Singh, titled “Portraits of Power: Half a Century of Being at Ringside".

On 12 October, finance minister announced a stimulus package worth ?46,675 crore including incentives for central government employees to spend more on consumer durables and higher capital expenditure for both the centre and states. Rating agency Moody’s last week said the measures worth 0.2% of GDP will provide only limited support to growth and highlight the “very weak fiscal position" of the government.

Last week in an interview with Mint, expenditure secretary T.V. Somanathan said though nothing is planned yet, another stimulus cannot be ruled out. “As of now, I don’t think there is anything else planned. But in real life nothing can be ruled out. Finance minister has always said that we will keep watching the situation and react periodically as and when the situation warrants. So I can’t give you a commitment either way," he added.

Asked whether the finance ministry will come out with its own projection for the GDP contraction for the current financial year, Sitharaman said that the ministry has just started making an assessment towards this after waiting for the first half of the financial year to be over. “We have got a lot of inputs which are very different from what we had in July. Perhaps we will have to come up with a statement, whether we do it in public or whether I do it in the Parliament is one thing but obviously the finance ministry will have to make an assessment on what’s it is going to be like," she added.

The Reserve Bank of India has projected the economy to contract 9.5% in FY21 while the International Monetary Fund has estimated GDP to shrink 10.3% during the current financial year.

Replying to another question, Finance minister said the cabinet will soon take up the proposal of identifying the limited strategic sectors in which public sector enterprises should function letting other sectors open for private sector as announced earlier as part of the Atmanirbhar Bharat package. “There should be a clear cut mention of how Indian economy has to be; that shift away from the socialistic baggage that we have been carrying all the while, some desirable and some burdensome. That will make a big directional shift and I desire that to happen," she added.

Sitharaman said she wants to see federalism becoming robust in India. “Continuous real time robustness is what is going to make this country stronger. Even prime minister periodically mentions that every state has to develop. Even if one state is left behind, it will become a baggage. Otherwise you will have the speed with which you want to grow being slowed down because of the pull factor of those who are left behind," she added.

Among other major reforms, finance minister said she wishes India’s education system could match all needs of its youth and India becoming an education hub for foreign students to come and study.