News Update

FM Allays Inflation Fears Over Economic Growth

• ByAyushi Ray     |    August 17, 2021

FM, Nirmala Sitharaman allays inflation fears over economic growth. She also added that the government is constantly monitoring prices of essential commodities, and further said that ministries have been told to front-load the ₹5.54 lakh crore capital expenditure (capex) budgeted in the current financial year to boost the economy. On capex, she said, the only message given to ministries and departments is to “spend and spend at the earliest.” There is no cut in capex and ministries have been asked to spend the fourth quarter (Q4) budget in Q3 and third quarter budget in Q2 to accelerate growth. Their expenditures are monitored closely, she said. India’s retail inflation in July was 5.59% after staying above 6% for two consecutive months. The Reserve Bank of India’s inflation target is 4% with the upper tolerance limit of 6%and the lower tolerance limit of 2%.

High fuel prices have some inflationary impact. The weightage of petrol and diesel in the WPI index are 1.60% and 3.10%, respectively, and in the CPI index, 2.19% and 0.15%. Wholesale inflation eased to 11.16% in July from a record high of 13.11% in May after food items became cheaper. When asked about the issue of high taxes, Sitharaman said the Modi government has inherited huge financial burden in terms of oil bonds that were issued by the Congress-led United Progressive Alliance (UPA) government and the current regime is forced to pay this. According to government data, the interest on oil bonds paid in the last seven years totalled ₹70,195.72 crore. The future interest burden on the government (from 2021-22 to 2025-26) is ₹37,340 crore. Besides, the government has an outstanding principal of over ₹1.3 lakh crore.

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