Finance Minister Nirmala Sitharaman said on Thursday that global and regional uncertainties combined with domestic disruptions may keep inflationary pressures elevated in the coming months. Meanwhile, she advocated the alignment of processes among Multilateral Development Banks (MDBs) to benefit client countries.
Addressing the Development Committee Plenary Meeting of the World Bank in Marrakech (Morocco), the FM talked about growth prospects and challenges for the Indian economy. “While domestic consumption and investment demand are expected to continue to drive growth, global and regional uncertainties and domestic disruptions may keep inflationary pressures elevated in the coming months, warranting greater vigilance by the government and the RBI,” she said.
She said the government has already taken pre-emptive measures to contain food inflation, which is likely to subside price pressures in the market soon.
“The external sector requires a closer watch to strengthen merchandise export growth in the face of slowing global demand. Services exports continue to do well and are likely to continue doing so as the preference for remote working remains unabated, typically manifested in the proliferation of global capability centres,” she said.
Sitharaman’s remarks came on a day when the Statistics Office said retail inflation based on the Consumer Price Index dropped sharply to 5 per cent in September from 6.8 per cent in August. At the same time, industrial growth surged to 10.3 per cent in August, compared to 8 per cent. Earlier, the International Monetary Fund (IMF) upped India’s growth forecast for the current fiscal to 6.3 per cent from July’s forecast of 6.1 per cent.
“While growth prospects have been strong, domestic economic activity is maintaining resilience with a healthy balance sheet of the private sector and increased capex spending of the government, crowding in private investment,” Sitharaman said.
Further, she highlighted that the robustness of domestic investment is the result of the government’s continued emphasis on capital expenditure, which is expected to drive growth in the coming years. In FY24, the Union Government increased the capital outlay by 33.3 per cent, raising the share of capital expenditure in total expenditure from 12.3 per cent in FY18 to 22.4 per cent in FY24.
The FM said India supports the World Bank’s new vision to create a world free of extreme poverty and boost shared prosperity on a liveable planet, which is a formidable mandate. She asked the World Bank to take the lead in aligning processes and procedures with other MDBs to benefit client countries that deal with multiple such institutions.
She highlighted the need to ensure that the augmented WBG (World Bank Group) country engagement model is firmly rooted in national development priorities. Also, while engaging in climate action in line with the principle of “common but differentiated responsibilities and respective capabilities, we encourage the World Bank to be more ambitious in its commitment to adaptation finance,” she said.
“Enabling private capital mobilisation at scale will require an enhanced ‘One World Bank’ approach. At the same time, we must be realistic in our assessment of the potential of private capital mobilisation, given the global economic outlook,” added the minister.