Living standards will rise the most in the coming decades: FM Sitharaman
India will witness the strongest rise in the living standards of the common man, thanks to the government’s initiatives and efforts to double per capita income in several years, Finance Minister Nirmala Sitharaman said on Friday.
Addressing the third edition of the Kautilya Economic Conclave, the minister highlighted that inequality in India has reduced due to the Gini coefficient, a statistical tool to measure inequality, which has shown improvements in both urban and rural areas.
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“I expect these improvements to continue as the effects of the past decade of economic and structural reforms will manifest themselves more strongly in the data in the coming years as the Covid shock fades from the economy,” Sitharaman said.
The coming decades, the minister said, “will see the greatest increase in the living standards of the common man, making it truly a period-defining era for an Indian to live in.”
“While it took us 75 years to reach a per capita income of $2,730, according to IMF projections, it will take just five years to add another $2,000.
“The next few decades will see the greatest increase in the living standards of the common man, making it truly a period-defining era for an Indian to live in,” she said.
The Indian government, she said, will seek to double per capita income within a few years for its 1.4 billion people (who make up 18 percent of the global total), despite geopolitical challenges that threaten world peace.
By 2047, when India crosses the centennial mark of independence, the new Indian era will have core features similar to those of developed countries, she said.
Viksit Bharat will bring prosperity not only to Indians but also to the rest of the world by being at the center of a vibrant exchange of ideas, technology and culture, she added.
Speaking about the country’s financial system, she said the soundness and resilience of the Indian banking sector are underpinned by a sustained policy focus on improvements in asset quality, improved provisioning for bad loans, sustainable capital adequacy and an increase in profitability.
NPA (non-performing asset) ratios are at their lowest in recent years, and banks now have efficient debt collection mechanisms in place.
Ensuring that the financial system remains healthy and the cycle lasts longer is one of our most important policy priorities, the minister said.
Highlighting the forces that will shape the Indian era, Sitharaman said the country’s youthful population provides a strong base for improvements in total factor productivity, savings and investment.
While the share of youth in India will rise over the next two decades, several other developing economies have passed their demographic peak.
This will boost domestic consumption over the next decade, she said, adding, “Currently, 43 percent of Indians are below the age of 24 and are yet to fully explore their consumption behavior.
“There will be organic growth in consumption as they become full-fledged consumers. At the same time, an emerging middle class will pave the way for strong consumption, inflows of foreign investment and a vibrant market.”
Moreover, she said, India’s innovation capacity will mature and improve in the coming decades.
On fiscal prudence, Sitharaman said the government remains committed to its commitment to reduce the fiscal deficit.
“Helped by strong revenue generation, limited growth in revenue expenditure and healthy economic activity, the fiscal deficit is expected to decline further from 5.6 percent of GDP in FY24 (provisional figures) to 4.9 percent in FY25. Pursuing budgetary discipline will not do that. will only help keep bond yields in check, but will translate into lower borrowing costs for the entire economy,” she said.
Speaking about the government’s capex plan, the finance minister said, the government has budgeted to increase its infrastructure investment by 17.1 per cent to Rs 11.1 lakh crore by 2024-25. This amounts to 3.4 percent of GDP in FY25.
Moreover, she said, a greater share of the budget deficit is now accounted for by capital expenditures, indicating increasingly investment-oriented deficit financing.
The fall in commodity prices has enabled the reduction in the budgeted allocation for fertilizer and fuel subsidies, she said, adding that this has helped limit the growth in revenue expenditure, which is estimated to be 6.2% annually percent will increase.
To ensure policy continuity, the foundation of sustainable growth, she said, “our government has initiated and continued reforms in infrastructure, banking, trade policy, investment and ease of doing business.”
Ultimately, the major stakeholders and beneficiaries of the growth process towards Viksit Bharat will be the four major castes, namely ‘Garib’ (poor), ‘Mahilayen’ (women), ‘Yuva’ (youth) and ‘Annadata’ (farmer). she said.
Accordingly, the budgets in Amrit Kaal will be prepared with these stakeholders in mind, she said.
The budget for FY26 is likely to be presented to Parliament on February 1.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First publication: Oct 04, 2024 | 4:11 pm IST