What She Did

Inflation Control

• Banned wheat exports, reduced central excise on petrol and diesel by ₹8 and ₹6 per litre, respectively.
• Gave LPG subsidy of ₹200 to Ujjwala Yojana beneficiaries.
• Reduced customs duty on raw materials/intermediaries for plastic products.
• Cut import duty on select raw materials for steel.
• Imposed export duty on select steel products.
• Notified duty free import of crude soya bean, sunflower oil for two years.

Revenue Augmentation

• Hiked import duty on gold from 10% to 15%
• Imposed special additional excise duty of ₹6 per litre on export of petrol and ₹13 per litre on export of diesel.
• Imposed cess of ₹23,250 per tonne on crude oil.
  
  

Infrastructure

• Allocated ₹7.5 lakh crore for capex in FY23.
• Ensured mega allocation to sectors like highways, railways.

No other finance minister has had to face the kind of challenges that have come the way of Nirmala Sitharaman. She inherited a slowing economy with low consumption and demand. GDP growth had plummeted from over 8% in FY16 to 6.5% in FY19. It subsequently touched 3.7% in pre-Covid FY20. Then came the mother of all crises, Covid-19, delivering a body blow to the economy. GDP contracted 6.6% in FY21, the second year of her stint.
That was the period when Sitharaman, along with her team, would burn the midnight oil to track implementation of the ₹20 lakh crore Atma Nirbhar Bharat package. Officials say credit guarantee schemes, specifically for MSMEs, were accorded top priority. Sitharaman reviewed bank-wise disbursements under the scheme every evening. The package played a key role in pulling the Indian economy out of trouble. “Going through the pandemic and immediately after that, India ensured that no one remains hungry even during the severest lockdown,” Sitharaman said on the sidelines of the G20 meeting of finance ministers and central bank governors in July.
In 2021, just when things were looking up, the second wave of Covid-19 struck, threatening the nascent recovery. This time, however, lockdowns remained localised. It did impact GDP, though. Growth was 4.1% in fourth quarter of FY22. In past one year, macroeconomic challenges have grown manifold, aggravated by Russian invasion of Ukraine. Led by rise in global commodity prices, inflation started rising in India in December last year and touched 7.79% in April in the wake of supply disruptions caused by the war. Rising interest rates in U.S. and roll-back of post-Covid-19 liquidity led to massive flight of capital from emerging markets. As a result, rupee has crashed to a record low and was at 79.91 per dollar on July 27. “Monetary tightening in advanced economies, particularly in U.S., tends to cause foreign investors to withdraw funds from emerging markets. Foreign portfolio investors have withdrawn about $14 billion from Indian equity markets in FY23 so far,” Sitharaman told Lok Sabha on July 18. The outlook is grim. With U.S. inflation hitting a new high of 9.10% in June, the Federal Reserve may opt for hundred basis points increase in policy rates, triggering further flight of capital.
This means the fourth year of her term has brought additional challenges of managing growth amid high inflation, depreciating rupee and rising current account deficit. But Sitharaman and her team have been swift in dealing with the new risks. Immediately after the off-cycle policy rate increase by RBI on May 4, the ministry announced fiscal measures to control inflation. On May 21, Sitharaman announced a cut in central excise on petrol and diesel by ₹8 and ₹6 per litre, respectively.
The decisions fuelled concerns the government will breach the fiscal deficit target. It needed to think out of the box as lower revenue would mean compromising the ₹7.5 lakh crore capital expenditure plan, a cornerstone of post-Covid recovery. On July 1, it announced revenue augmentation measures. It increased import duty on gold from 10.75% to 15% to ease pressure on current account deficit due to gold imports. It also imposed a special additional excise duty of ₹6 per litre on export of petrol and ₹13 per litre on export of diesel. This is apart from special additional excise duty of ₹6 per litre on export of aviation turbine fuel and cess of ₹23,250 per tonne on crude oil. Some of these steps were partially rolled back a few days later as oil prices fell.
That said, macroeconomic uncertainties will persist till the geo-political situation improves, global inflation cools off and U.S. Fed begins paring rates. Till then, the 28th finance minister of the country will have to tread with caution. — Ashutosh Kumar