India’s economy will return to growth in 2021-22 after a sharp contraction in the current year, and higher public spending will lay the foundation for stronger growth in the next four to five years, Finance Minister Nirmala Sitharaman said on Thursday. She was speaking at the Reuters Global Investment Outlook Summit, 2021.
Hit hard by the Covid-19 pandemic, India’s economy is expected to contract nearly 10% in this financial year.
“I would think 2021-22 will be very big, good traction year for achieving a really good rate of growth that itself is going to be a launching pad for 4-5 years of growing at a good speed, provided we do enough on the budget and spend on infrastructure,” the Finance Minister said. She gave no numbers about how big a government spending increase she planned to propose.
She suggested the government should spend more in the months ahead to boost the growth rate. “I have to be conscious that if I don’t spend now, then the stimulus is meaningless, if I don’t spend now the revival is going to get deferred and we can’t afford that.”
On Covid-19 and India’s preparedness in dealing with the pandemic, Sitharaman said that the government was bulking up the logistics including sufficient cold storage facilities to ensure delivery of the vaccine down to the village councils across the country. “We seem to be getting a picture that there is a good possibility, months is what the health minister has been saying that we will need only a few months to wait for a vaccine,” she said.
The government has not yet finalised how much funds would be required for the vaccination as it would depend on development costs and how many dosages are required, she said.
Prime Minister Narendra Modi’s government hopes for deeper ties with the incoming administration of US President-elect Joe Biden. It has long wooed the United States for investment, trade and technology, but for the past four years Washington has stepped up the pressure on India to open up its markets more under President Donald Trump.
Sitharaman said the two economies had a lot to gain from each other and defended the role of India’s outsourcing and IT industry. “They cannot be seen as they are taking away jobs from the U.S. On the contrary they contribute to the U.S. economy just as they of course add to the Indian services industry,” she said.
WITH AGENCY INPUTS
