Monetary, fiscal policies working in tandem: FM Nirmala Sitharaman

NEW DELHI: Finance minister Nirmala Sitharaman said Saturday that monetary and fiscal policies are working in tandem, with good coordination between the central bank and the government, and that no one encroaches on other’s territory.She said industry is seeing signs of recovery in consumption and is looking at reviving capacity utilisation. “There has been good coordination between RBI (Reserve Bank of India) and government… This coordination was very evident during the Covid,” she said, adding that both will continue to work in a well-coordinated fashion to support growth and contain inflation.

There has been close coordination between the two over the past 10 years, she said. Sitharaman said the fiscal and monetary measures announced recently will help boost consumption and promote private investment.

In her budget speech on February 1, the FM had proposed a significant income tax cut for the middle class by raising the exemption to Rs 12.75 lakh a year. Days later, the RBI cut the policy rate by 25 basis points (0.25 percentage point) to support growth.

Duty Tweaks

“After the budget, the few inputs I’ve had from some business leaders is that the orders for fast-moving consumer goods for AprilJune are already getting booked, and the industry is clearly seeing signs of a possible recovery of consumption,” Sitharaman told reporters after addressing the RBI’s central board at the customary post-budget meeting.

As a result, many businesses are looking at reviewing their capacity utilisation, the FM said, adding that this means it can be safely assumed that the triggers for a consumption-driven cycle are clearly being felt by those who have to make investment decisions. “I see this as a positive sign and with yes terday’s (Friday’s) decision of the RBI, together things can move in alignment and the required traction we made in this course.”

The basic customs duty changes in the budget were not a knee-jerk reaction to any global development and had been in the works for the past two years, Sitharaman added. “We will provide tariff protection as required by the industry while focusing on making industry more competitive.” The minister said it was an ongoing process. “We want to make India a lot more investor-friendly, trade-friendly, and at the same time, balance it with Aatmanirbhar Bharat where we need to have production, particularly through the MSMEs.”