To a question on whether there is any plan to print currency to tide over the crisis, the Finance Minister said, “No Sir”.
Many economists and experts have suggested to the government to print more currency notes to tide over the difficult economic situation with a view to support the economy ravaged by the spread of COVID-19, and protect jobs.
In economic parlance, printing of money is called monetisation of the deficit. In other words, monetisation of the deficit happens when the Reserve Bank of India (RBI) buys government securities directly from the primary market to fund the government’s expenses.
India’s real Gross Domestic Product (GDP) is estimated to have contracted by 7.3 per cent during 2020-21, Sitharaman said in a written reply to Lok Sabha.
This contraction reflects the unparalleled effect of the pandemic and the containment measures that were taken to control the pandemic, she said.
“The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along with the astute support of Atmanirbhar Bharat Mission has placed the economy firmly on the path of recovery from the second half of FY 2020-21,” she said.
The government had announced a special economic and comprehensive package of Rs 29.87 lakh crore under AtmaNirbhar Bharat (ANB) to combat the impact of the pandemic, to revive economic growth and to bolster employment during 2020-21, she said.
The Union Budget 2021-22 announced a number of measures to support broad-based and inclusive economic development including a 34.5 per cent increase in capital expenditure and 137 per cent increase in health expenditure, she said, adding, the government announced a relief package of Rs 6.29 lakh crore in June 2021, to strengthen public health and provide impetus for growth and employment measures.
Replying to another question, Sitharaman said, the impact of the second COVID-19 wave is expected to be muted given localised containment measures and rapid upscaling of the vaccination drive.
The Union Budget 2021-22, estimates India’s nominal GDP growth at 14.4 per cent during the current financial year ending March 2022.
The RBI, in its latest Monetary Policy Committee (MPC) resolution of June 4, 2021, has projected India’s real GDP to grow at 9.5 per cent in 2021-22, after accounting for the impact of the second wave as compared to its earlier projection of 10.5 per cent, she said.
In reply to another question, the Finance Minister said the RBI has announced Special three-year Long-Term Repo Operations (SLTRO) of Rs 10,000 crore at repo rate for the Small Finance Banks (SFBs), to be deployed for fresh lending of up to Rs 10 lakh per borrower to provide further support to small business units, micro and small industries, and other unorganised sector entities adversely affected during the current wave of the pandemic.
The first auction under the SLTRO was conducted on May 17, 2021, she said, adding, the unutilised portion of notified Rs 10,000 crore is being carried forward in each subsequent auction, until fully utilised or till the last auction to be conducted in October 2021, whichever is earlier.
Three auctions under this scheme have been conducted so far, and SFBs have availed a total amount of Rs 1,640 crore under the scheme, she added.