No pump priming economy, government keen on asset creation only: FM Nirmala Sitharaman

NEW DELHI: Brushing aside apprehensions over the fiscal deficit target in 2020-21, Finance Minister Nirmala Sitharaman said on Monday that the government is taking the most fiscally prudent route to meet the target.

“We are in a situation, where people may want the government to ‘pump-prime’ the economy… (and) we are willing to spend if we have to. But, we are clearly saying we will not repeat the mistakes of splurging that happened in the past.

The money we are spending now is with a clear picture of asset creation,” she said.

According to analysts, the FM was referring to the 2008 crisis due to the Wall Street crash and a global slowdown, during which the then UPA government had adopted an expansionary fiscal policy to splurge on developmental projects.

While this raised GDP growth, it was later criticised by some as having caused inflationary pressures on the economy.

“A lot of people are speculating about the (deficit) targets … that it will be 4 per cent or 4.5 per cent or about the divestment proceeds (not coming in).

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The attempt is to show that we have had a complete thinking-through and are taking the most fiscally prudent route,” said Sitharaman said in her first industry interaction post Budget, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI).

“When government is putting money into infrastructure, it will have a cascading effect. The money garnered from divestment will not go into revenue expenditure, but will create infrastructure for the economy and this would have a multiplier effect,” Sitharaman said.

Manufacturing PMI at eight-year high

The BSE Sensex rebounded on Monday after a 1,000-point crash on Budget day trading, on the back of broad-based buying and a surprisingly positive monthly survey, which said manufacturing sector activity rose to an eight-year high in January.

While the Sensex jumped 137 points, IHS Markit India Manufacturing PMI rose to 55.3 in January from 52.7 in December, driven by rise in new business orders thanks to a rebound in demand

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