Seeing signs of a consumption recovery, the private sector is reviewing capacities, the Finance Minister said.
India Inc. is gearing up a consumption recovery and reviewing existing capacities’ utilization rates, following the Budget’s push for consumption, combined with the interest rate cut initiated by the central bank on Friday, Finance Minister Nirmala Sitharaman indicated on Saturday, signaling this could be a precursor for a durable recovery in private investments in the coming year.
Asserting that India’s economy has been in good stead over the past ten years thanks to good coordination between the Reserve Bank of India and the Union Government, Ms. Sitharaman said: “I believe that with the new Governor [Sanjay Malhotra] as well as the entire RBI team, including the deputy governors and executive directors, a similar harmony will be there and the RBI and the central bank will work in a very coordinative fashion, keeping our growth impulses in mind.”
Addressing the media after attending the customary post-Budget meeting of the RBI’s central board in the capital, Ms. Sitharaman said fiscal and monetary policy working in sync works best for the economy whether the focus is taming inflation or stimulating growth. “No one encroaches on each other’s territory. I don’t think that has existed in the last 10 years. And now I don’t see that existing even in the future,” she averred.
Asked if the private investment cycle is expected to revive in light of the Budget’s push for consumption and the 0.25% interest rate cut from the RBI, Ms. Sitharaman said: “Yes, I would expect that… because, at least since after the Budget, the few inputs that I’ve had from some business leaders and those who’ve been interacting with business is that.”
“These are anecdotal and I am not saying I am relying on them, but this is being heard from different sources, and most of it seem to be on the same page. The orders for fast moving consumer goods for the period April to June are already getting booked, and industry is clearly seeing the signs of a possible recovery of consumption,” the minister added.
“Asa result, many of them are looking at reviewing their capacity utilisation itself, which means from these limited anecdotal inputs that you’re getting, you can safely see that the triggers for a consumption-driven cycle, is very clearly being felt by those who have to take the investment decisions,” Ms. Sitharaman noted. “I see this as a positive sign, and with yesterday’s decision of the RBI, I am sure, together, things can move in alignment and in the required direction that we need in this course,” she said.
Governor Malhotra said that the RBI is alert to all pressures on the inflation front, including the Rupee depreciation impact on imported goods’ prices. “As per our estimates, 5% depreciation in the Rupee leads to about 30-35 basis points of inflation. That has been kept in mind, and we’ll be watchful on that account,” he said.
“Most of the depreciation is driven by the uncertainties which have come about because of the global, and especially, you know, the Trump- related tariff announcements. And hopefully, you know that should settle down, and that should help us in the downward movement of inflation,” he concluded.
Published – February 08, 2025 10:36 pm IST
