Nirmala Sitharaman: The possibility of a soft landing for the global economy is increasing

Union Finance Minister Nirmala Sitharaman said on Friday that a soft landing is an increasing possibility in the global economy, which has experienced tremendous stress over the past few years.

Observing that better days are ahead thanks to coordinated actions between countries and multilateral financial institutions, the finance minister also warned that economies have not recovered that much yet.

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“The dominant opinion in the two-day talks of both the (International Monetary) Fund and the World Bank is that there will be a soft landing. The efforts of the Fund, central banks and all institutions and governments have managed to keep inflation low for a meaningful period of time. So the possibility of a soft landing is increasing,” Sitharaman told a Washington DC-based global think tank.

“Then reasonable growth figures will come even from developed economies. Definitely not in negative territory. And finally, coordinated actions between countries to manage any supply chain shocks that have characterized the global economy for, say, at least two years, are being met by countries that are much better prepared and therefore represent a sensible approach. “Could we have better days than what we’ve seen in just the last few years?” Sitharaman said in her speech at the Center for Strategic and International Studies (CSIS) think tank. he said.

“But that said, we all had to be careful because economies are not recovering that much yet. Everything is fine, you see they are not going down any further, but there is still a moderate world trade picture. Demand in developed economies is actually not that attractive. Therefore, global trade does not see the possibility of a major recovery in the near future,” he said.

“As a result, countries that are very dependent on commodity exports or are part of the global value chain are not seeing a major increase in demand. In other words, the emerging picture is positive, but it will not change the situation quickly. Every country has borrowed far more than it would ideally have to recover from COVID; “Whether this borrowing is quality borrowing in the sense of borrowing for quality spending or not, it should be on their balance sheets,” he said.

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“As a result, trying to maintain some kind of control over the fiscal deficit will be difficult for most countries. Even if there is no serious control on this issue, measures need to be taken to at least gradually bring the fiscal deficit to a reasonable figure. This is the picture that emerges and I completely agree with it because we (India) are growing rapidly on the back of a single domestic market.

“At the same time, we face a challenge because we still have very few imports. But since our traditional export geographies have not really recovered, there is not a commensurate increase in exports, we are facing an external challenge rather than an internal one.” The Minister said.

Answering a question, Sitharaman said that India is trying to grow at the fastest possible rate. “But I might ask the question: What is holding investors back? Why do global investors take for granted the textbook normal assumption that economic activity is good and solid and dynamic money flows? I want to ask where are the investable funds, where are the investors, why are they looking, what are they looking at? What’s holding them back? “This is a question I like to ask,” he said.

“Even as I ask this question, I must admit that India has received a significant number of foreign direct investments. So this does not mean that nothing will come to India. Yes it is coming. But with this coming, I still think more opportunities lie and all the talk is about China plus one, shared values, democracies, speaking English, demographic dividends and Indian youth having good enough skills to serve in the Gulf Cooperation Council. GCCs of the world located in India and the world located outside. So the question is, what is stopping it?” he asked.

“I don’t think there is anything holding the Indian economy back. Policies work. Reforms are still happening and will continue to happen. Further liberalization of the economy will be achieved. “We’re reaching out to newer and newer friends and also talking more about the Indian economy with more revenue, more platforms that will probably be more attractive to investors,” he said.

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