The government is concerned about the impact of the Ukrainian conflict on trade
During a discussion on the budget with industry stakeholders in Chennai, Sitharaman said the Ministry of Finance was carrying out a comprehensive assessment of the impact of the dispute in discussion with various line ministries, and analyzing related issues. both to new exports and to payments for items already exported.
“We are rightly worried about what will come out of this, but I am more worried, if not equally, about what will happen to our exporters who are doing very well, especially those in the agriculture sector,” Sitharaman said. “You can rest assured that we are quite seized of the matter in its granular form as it is going to impact essentials like edible oils and fertilizers among others,” she said.
Sitharaman had spoken earlier about the impact of the war on economic recovery in India as well as globally. The latest statements follow the restrictions imposed by SWIFT and the fears of exporters that their payments could be blocked. Sitharaman asked for industry feedback on payment difficulties due to the dispute. Although export volumes are not significant in the case of Ukraine or Russia, some of the imports such as fertilizers may be affected.
Later, speaking at the DD Conclave on the Union Budget 2022, FM said that every war is a challenge and development in Ukraine matters. “While no assessment can be made now, we will analyze the impact based on developments. We are seized of the matter,” Sitharaman said, while answering a pointed question about the surge in international crude prices.
Global prices have risen above $100 a barrel, prompting oil companies to raise retail prices, a move that will impact household budgets and drive up inflation. Several commodities have also seen a sharp rise in prices, which will further fuel inflation in the economy.
Amidst the problems facing Indian students in Ukraine, the education sector has demanded to increase sector spending from current levels of around 3.5% of GDP to around 6% and thus ensure that students don’t have to study abroad in volatile conditions. nations. Responding to the question, FM and his team said that the tax-to-GDP ratio needed to improve significantly in order to do so.
“To meet industry demands, our tax-to-GDP ratio needs to double from current levels of 10-11%. Growth on the expenditure side of the budget will critically depend on growth on the fiscal side,” said TV Somanathan, finance secretary. Sitharaman added, “I take your concerns very seriously, Prime Minister Modi has also talked about increasing the number of places in higher education, but we have limited resources and the tax base needs to widen.”
On a request from the jewelry industry to raise the limits on digital payments from Rs 1 lakh to Rs 2 lakh, Sitharaman said the NPCI is looking into the matter. Regarding the woes of the hospitality industry post Covid, FM said there had been recent consultations and meetings with the tourism and hospitality industry post budget and they are working on the issues in the sector . In case of demands from the cement sector to move excess capacity from South to North, the FM has requested Industry Representative N Srinivasan, Vice President and Managing Director, India Cements to meet with them and present detailed recommendations and solutions.
Sitharaman said the Union budgets presented last year are designed to shape India towards its 100 years of independence. “If last year the budget focused on health care, this year it is on education. The baseline is the push on infrastructure, as every rupee spent on it produces a multiple effect of Rs 2.35 in the same year and 3.45 within 2-3 years,” she said.
Sitharaman said economic reforms introduced in 1991 were not backed by major policy changes by successive governments due to their reliance on alliance partners. This government over the past two years has brought about a decisive change of direction on major policies, she added.