May 13, 2024

Now The RBI And The Private Sector Will Have To Pitch In

By Linus Garg
First publised on 2024-02-02 07:25:14

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Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.

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Finance minister Nirmala Sitharaman has given clear indications to the RBI and the private sector by managing the finances well. She has managed to keep fiscal deficit in check at 5.8% which is lower than what was projected in last year’s budget. Going forward, she has pledged to reduce it further to 5.1%. That means that the government will be borrowing at least Rs 1 lakh cr less. Simultaneously, instead of burning money by announcing new welfare schemes, increasing the handout in existing schemes or increasing subsidies in an election year, she has increased allotment for capital expenditure and infrastructure projects.

The message to the RBI is that with reduced pressure on inflation due to prudent government policies, it must now usher in a lower interest regime and boost liquidity. The message to the private sector is clear. The government will do its bit in pushing big infrastructure projects and invest in building assets for the nation. It will not borrow indiscriminately to reduce the pool of funds from which the private sector borrows. It will do all to nudge the RBI to lower interest rates. It will create opportunities for the private sector - mainly the core sector and downstream units associated with it - to expand capacities and set up new units.

This is good for long term development of the nation. The government knows that there are limitations on public sector job creation. The real driver of the economy is the private sector and it is not really firing at the moment. But by encouraging the sector to invest, the government is taking steps for inclusive development which will create jobs and boost demand. This is welcome.