In a recent interaction, Nirmala Sitharaman, India’s Finance Minister, provided valuable insights on a range of economic subjects during the ET Awards for Corporate Excellence. The conversation delved into areas such as the state of the economy, taxation, and potential global challenges.
Sitharaman asserted that she does not perceive a significant contagion risk for India, despite possible economic contractions in its export markets. She reasoned that the Reserve Bank of India (RBI) has been gradually distancing itself from the US Federal Reserve, reducing the potential for economic contagion from western markets.
However, she did concede that a recession in India’s export markets could dampen demand and negatively impact the country’s export performance.
Discussing the RBI’s recent decision to halt interest rate hikes, Sitharaman refrained from commenting directly, instead commending the RBI for its sense of the economic pulse on the ground. She expressed confidence in the RBI’s ability to make sound decisions regarding future interest rates.
On the topic of inflation pressure due to possible OPEC+ output cuts and a potentially weaker monsoon owing to the El Nino effect, Sitharaman reassured that the Indian economy is prepared to handle these potential challenges. As she pointed out, these aren’t new scenarios and the country has weathered similar conditions before.
Speaking on the subject of the Old Pension Scheme (OPS) versus the National Pension System (NPS), Sitharaman stated that while debates have subsided following the budget announcement, it appears increasingly unlikely that a return to the OPS would be feasible due to the potential burden it would place on the state’s resources.
The finance minister defended the private sector’s contribution to the economy, even amid a slower than desired pickup in capital expenditure. She argued that significant hurdles like the pandemic and geopolitical instability have influenced the sector’s performance. Nevertheless, she recognized the growth in investments and expansion efforts in the country.
When questioned about an increase in income tax notices and GST evasion cases, Sitharaman explained that the country’s tax authorities can’t afford to ignore clear evidence of wrongdoing, such as the existence of shell companies. She added that these steps are essential to ensure faith in the taxation system and to discourage misuse.
Commenting on the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), she acknowledged the successes of GST and challenges facing the IBC due to an insufficient number of members in the relevant benches and a delay in filling vacancies. She reassured, however, that these issues are being addressed.
In response to questions about India’s capital gains tax regime and gender budgeting, Sitharaman clarified that no current plans exist to reform the former. Regarding gender budgeting, she revealed that focus is now shifting towards policies led by women, emphasising women’s empowerment beyond just financial considerations.