(Bloomberg) – India’s Finance Minister Nirmala Sitharaman said her country’s economy appeared healthy and expressed confidence that accelerating inflation would be kept under control.
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“We look very healthy,” Sitharaman told Bloomberg Television’s Balance of Power with David Westin. “The recovery appears to be sustainable.”
India’s economy had already started to slow before the pandemic, mainly due to a crisis in the shadow banking sector. The shock of Covid-19 led to its biggest drop ever, with restrictions weakening demand in the consumption-driven economy.
The IMF this week estimated an 8.2% pace of expansion this year, which would still make India the fastest growing major economy. It would also be in line with the government’s forecast of 8% to 8.5%.
In a separate interview, Sitharaman cited the Reserve Bank of India’s forecast of 7.2% for the fiscal year ended Jan.
monetary policy
Accelerating inflation is making it harder for the central bank to keep interest rates low longer to support growth. While the RBI has kept interest rates at record lows, rising consumer prices have recently prompted a dovish turn towards prioritizing inflation over supporting growth.
In its policy statement of April 8, the RBI revised its inflation forecast for the current financial year from April to March to 5.7% from 4.5% in February.
The chief financial officer blamed factors beyond India’s control for a recent acceleration in inflation, citing higher crude and cooking oil prices.
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She said the country’s policymakers, along with the central bank, “will be able to manage it.”
The central bank must be “careful” about balancing different economic forces, Sitharaman said. “They were sensitive to local developments.”
Referring to calls by the US and other nations for India to pressure Russia over its invasion of Ukraine, she noted the importance of India’s geopolitical position and the need to ensure it remains strong.
“We have a northern border where we’ve had a war despite the pandemic,” she said. “We had a western border, where we also frequently invade.”
“India’s position is not without considering these factors. I want that to be kept in mind when the United States or any of the western liberal democracies look at India,” she said.
“We have to be strong. Our interest should not be hurt.”
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