The two-day conference, starting Wednesday, was attended by 25 key ministries, industry leaders, banks and financial institutions. Finance minister Nirmala Sitharaman on Wednesday exhorted corporate India to enhance its risk appetite and undertake expansion to supplement the government’s efforts to stimulate growth. The demand side of the Covid-hit economy is now able to “manifest itself”, she said at a CII event, indicating that the companies that ramp up capacity now will be able to cash in on the resurgence in consumption that was visible in the build-up to Diwali.
In certain cases, supply bottlenecks weighed down consumption, she said, highlighting how demand and supply sides are closely interlinked in a real economy. For instance, car sales could have been higher had there been no chip shortage, she said. Hence the criticism that the government was rolling out mostly supply-side relief measures and ignoring the demand side in the wake of the pandemic is misplaced, she hinted.
In the three weeks preceding Diwali, credit worth as much as Rs 75,000 crore was distributed through the out-reach programmes conducted by banks across four-five categories, Sitharaman said. For her part, the minister pledged to go the extra mile if India Inc commits more investments. From reducing compliance burden of companies to ensuring adequate credit flow to them, the government has remained sensitive to the needs of industry, she stressed.
“At a time when India is looking at healthy growth, looking forward to industry to give additional impetus to growth…I want India Inc to be a lot more risk-taking. Industry should not delay creation of additional capacity,” Sitharaman said.
Separately, at a conference on Creating Synergies for Seamless Credit Flow and Economic Growth, the finance ministry impressed upon banks to shed inhibitions and spur lending, sources said. The two-day conference, starting Wednesday, was attended by 25 key ministries, industry leaders, banks and financial institutions. The move comes as the government seeks to stir economic growth through sustained credit push, amid fears that bankers were increasingly turning risk-averse.
Having remained muted for months together, non-food loan flow witnessed an uptick of late. Growth in non-food bank credit improved to 6.8% in September from 5.1% a year earlier. Loans to industry grew 2.5% from 0.4% but still remained low. That’s despite the fact the weekly average (net) liquidity surplus in the banking system has risen from an average of Rs 4.5 lakh crore by the end of June to over Rs 7.5 lakh crore as of end-September, according to CARE Ratings.
The minister stressed that new-age industries and start-ups are going to play a critical role in the economy. The banking sector, too, has witnessed a remarkable turnaround. “NPAs are drastically down. Recoveries are going up. More than Rs 10,000 crore has been raised by public sector banks (so far this fiscal),” she said at the CII event.
Furthering the case for Atmanirbhar Bharat, the minister stressed the need for reducing excessive reliance on imports, especially in essential goods, given the risks posed by a disruption in supply chains in the aftermath of the pandemic. “Even as we want to be linked with the global value chains, we have to understand and take cognizance of the risks it has posed us,” she said. India had to import protective equipment and even testing kits during the initial phase of the pandemic, she said.
Sitharaman said on Monday that the tax devolution to states would be ‘front-loaded’ to enable them to increase the pace of capital spending. “On November 22, an amount of Rs 95,082 crore would be released to states, instead of half that amount which is due as per the Budget,” the minister said, after a meeting with state chief ministers and finance ministers.
Of course, what has enabled the Centre to advance the tax transfers is robust growth in tax revenues. In the first seven months of FY22, gross indirect tax collections (net of refunds, but before devolution to states) grew 51% on year to about Rs 7.4 lakh crore, as against a required rate of 3% to achieve the full-year target of Rs 11.09 lakh crore. Similarly, gross (post-refunds) direct tax collections grew an impressive 70% on year in April-October of the current financial year to Rs 6.45 lakh crore.
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