NEW DELHI: Finance Minister Nirmala Sitharaman on Monday said that the economy is on the path of recovery and ruled out any plan to print additional currency notes to tide over economic crisis, as suggested by some economists.
“No sir,” the FM said, in a response to a question on whether there is any plan to print currency to tide over the crisis. “The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path of recovery from the second half of FY 2020-21,” she said.
Citing examples she added that the government had announced a special economic and comprehensive package of Rs 29.87 lakh crore under AtmaNirbhar Bharat (ANB) to combat the impact of the pandemic, to revive economic growth and to bolster employment during 2020-21. Replying to another question, Sitharaman said, the impact of the second Covid-19 wave is expected to be muted given localised containment measures and rapid upscaling of the vaccination drive.
Earlier this month economist Pinaki Chakraborty had said the Reserve Bank of India (RBI) should not print money to finance the fiscal deficit as it shall lead to fiscal profligacy. “I don’t think the RBI should ever do that. We stopped it in 1996 through a memorandum of understanding (MoU) between the RBI and the government. We should not go back to it again,” Chakraborty, who is director of the National Institute of Public Finance and Policy (NIPFP), said.
Meanwhile economists like Abhijit Banerjee, had suggested the government to resort to printing more currency notes to support the economy to help poor and to protect livelihood. “I think we should absolutely do it. We need resources to support the poor as well as to deal with a bunch of potential defaults on loans -- the latter was avoided in the first wave by some government credit guarantees.
Plus we need the resources to buy enough vaccines. This is the ideal moment to do that. And my guess is that the government is unnecessarily scared by the bond market’s possible reaction,” Banerjee said in May in one of his media interactions.