India has fiscal firepower to tackle war shock: FM
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New Delhi: Finance Minister Nirmala Sitharaman on Monday said India has fiscal space to support sectors impacted by escalating West Asia crisis, while the Reserve Bank has room to cut interest rate to deal with global challenges.
The Monetary Policy Committee headed by Reserve Bank Governor will announce its stance on interest rate on Wednesday. There is a widespread speculation that RBI will maintain status quo. The rate-setting panel began its deliberations on Monday.
Observing that the current year is even more challenging than the previous one, Sitharaman said, “the escalation of Middle East conflict has evolved from a regional security concern into a systemic tremor threatening vital arteries of global energy, and hardening the lines of new multipolar world order.”
She said that the world economy is witnessing volatility, uncertainty, complexity, and ambiguity, and global public debt has surged. The minister was speaking at an event organised by the National Institute of Public Finance and Policy (NIPFP) here.
However, she said India stands out in debt management with overall debt-to-GDP ratio at 81 per cent, the lowest among major economies. Many nations in the world are facing the issue of limited fiscal space to deal with the challenges as they fail to maintain fiscal prudence, she said. On the contrary, she said, “India has fiscal space. Room to maintain our capex programme, room for RBI to cut rates, and room to offer targeted support to affected sectors. This is the dividend of a decade of fiscal prudence and discipline.”
As the country had fiscal space, she said India recently reduced the excise duty on petrol and diesel and exempted customs duty for key petrochemical products to save the common man from rising prices due to the West Asia crisis.
