The government doesn’t decide to print more currency to bridge over the economic slowdown caused by the COVID-19 pandemic, Union minister of finance Nirmala Sitharaman told the Lok Sabha on July 26.
“The fundamentals of the economy remain strong as gradual scaling back of lockdowns, along side the astute support of the Aatmanirbhar Bharat Mission has placed the economy firmly on the trail of recovery from the last half of FY 2020-21,” Sitharaman said during a reply to an issue by Lok Sabha member Mala Roy on the state of the economy during the coronavirus pandemic.
When asked “whether there’s any decide to print currency to bridge over the crisis”, the minister of finance , in her written statement, replied “no”.
There are calls from multiple quarters that the Federal Reserve Bank of India (RBI) should print extra money and therefore the government should use that to distribute it among the people and little businesses most suffering from the economic hardships caused by the pandemic, either within the sort of direct income support or employment support.
This move is additionally referred to as ‘helicopter money’ or ‘helicopter drop’. A side effect of printing more currency is higher inflation.
–The finance ministry believes that an immediate income support scheme will cause more savings instead of more consumption, and therefore the only thanks to spur the latter is thru the trail laid call at the 2021-22 Union Budget, of upper public cost into infrastructure projects with large multiplier effect, which can create more jobs.
Replying to a different question in Lok Sabha, Sitharaman said that the impact of the COVID-19 second wave is predicted to be muted given localised containment measures and rapid upscaling of the vaccination drive.
She said that the Budget had estimated India’s nominal Gross Domestic Product (GDP) growth at 14.4 percent in FY 2021-22 while the RBI, in its latest Monetary Policy Committee (MPC) resolution of June 4, 2021, cut India’s real GDP to grow at 9.5 percent in FY 2021-22 after accounting for the impact of the second wave as compared to its earlier projection of 10.5 percent.
Sitharaman said that the Centre has undertaken a ‘judicious mix’ of both supply side and demand side measures during a calibrated manner to balance growth-inflation dynamics and support long lasting growth.
“As per RBI, the inflationary pressures are expected to be mitigated by a traditional south-west monsoon, comfortable buffer stocks, recent supply side interventions in pulses and oil seeds market, declining caseload of COVID-19 and gradual easing of movement restriction across states,” she said.