New Delhi, April 6 Finance Minister Nirmala Sitharaman said on Monday that India has fiscal space to support sectors affected by the escalating West Asia crisis, while the Reserve Bank has room to cut interest rates to deal with global challenges.
The Monetary Policy Committee, headed by the Reserve Bank Governor, will announce its stance on interest rates on Wednesday. There is widespread speculation that the RBI will maintain the status quo. The rate-setting panel began its deliberations on Monday.
Observing that the current year is even more challenging than the previous one, Sitharaman said, "the escalation of the Middle East conflict has evolved from a regional security concern into a systemic tremor threatening vital arteries of global energy, and hardening the lines of a new multipolar world order."
She said that the global economy is witnessing volatility, uncertainty, complexity, and ambiguity, and global public debt has surged.
The minister was speaking at an event organised by the National Institute of Public Finance and Policy (NIPFP) here.
However, she said that India stands out in debt management with an overall debt-to-GDP ratio of 81 per cent, the lowest among major economies.
Many nations in the world are facing the issue of limited fiscal space to deal with the challenges, as they fail to maintain fiscal prudence, she said.
On the contrary, she said, "India has fiscal space. We have the room to maintain our capital expenditure programme, the room for the RBI to cut rates, and the room to offer targeted support to affected sectors. This is the dividend of a decade of fiscal prudence and discipline."
As the country has fiscal space, she said that India recently reduced the excise duty on petrol and diesel and exempted customs duty for key petrochemical products to save the common man from rising prices due to the West Asia crisis.