Parliament nod to Budget for FY22; Nirmala Sitharaman says no risk of India's rating downgrade

New Delhi: Finance Minister Nirmala Sitharaman on March 24 said there is no risk of India’s sovereign rating being downgraded as a result of higher deficits, as the Rajya Sabha returned the Finance Bill 2021 without suggesting any change to complete the Parliamentary approval for Budget 2021-22.

The Lok Sabha had on Tuesday approved the Finance Bill 2021 — which contains tax proposals for the next fiscal year beginning April 1—after accepting some government amendments such as raising provident fund ceiling for tax-free interest to Rs 5 lakh and platforms such as Amazon not being liable for the equalisation levy as long as the goods and services listed are owned or provided by an Indian permanent establishment of the overseas entity.

The bill was debated in the Upper House, which returned it without suggesting any change or amendment.

Replying to the debate, Sitharaman said the government does not see a risk of a sovereign rating downgrade because of incurring a higher deficit arising from increased spending being done to boost the economy.

“India enjoys an investment-grade rating and we are not foreseeing any change or any chance of a downgrade due to us incurring higher deficits,” she said, adding the higher deficit was resulting from higher spending and increased borrowings.

Stating that economists and rating agencies are of the opinion that governments need to spend to put the pandemic-hit economies back on track, she said India too followed the same advice.

“So globally that is the advice everybody is receiving and we are also following. So it shouldn’t hurt our rating,” she said.

Sitharaman, however, had to curtail her speech following a verbal duel with TMC members over the implementation of central government schemes in West Bengal.

Speaking in Bengali to reply to a speech made by TMC MP Dola Sen in that language, the minister said the West Bengal government did not give names of farmers for giving cash help under the PM Kisan Yojana and refused to implement the health insurance scheme Ayushman Bharat in the state.

This led to vociferous protests from TMC members, with Sen saying, “We never refused… she is misleading.” With a high pitch electoral battle for West Bengal assembly between the BJP and TMC, Sen had drilled holes in Budget proposals, crying “lajja, lajja (shame, shame).” Sitharaman returned favour, saying, “Central government wants to give poor farmers in Bengal Rs 10,000 crore but state government is not allowing it.”

“She (Sen) used word ‘lajja, lajja’ but I want to say is that (not allowing farmers cash) right? Lajja, lajja,” she said.

“Again, central government wants to start Ayushman Bharat for poor people in Bengal but state government is not letting it. Is that fair for poor man? Lajja, lajja.” As infuriated TMC members continued to protest, Rajya Sabha Deputy Chairman Harivansh asked the minister to conclude and then put the Finance Bill to vote.

The bill and government amendments were approved by voice vote and the bill returned.

For the sake of parliamentary approval, Finance Bill is classified as a ‘Money Bill’—one that contains provisions related to taxation, borrowing of money by the government, expenditure from or receipt to the Consolidated Fund of India.

As per the Constitution, a Money Bill may only be introduced in the Lok Sabha, which can pass it by a simple majority of all members present and voting. Following this, it may be sent to the Rajya Sabha for its recommendations, which the Lok Sabha may reject if it chooses to.

If such recommendations are not given within 14 days, it will be deemed to be passed by Parliament.

The two houses had previously approved the Appropriation Bill, authorising the spending of a certain sum of money.

With Rajya Sabha returning the Finance Bill 2021, the Parliamentary approval for Budget 2021-21 has been completed.

Replying to the debate, Sitharaman cited low inflation, higher GDP growth, record foreign investment and lower fiscal deficit to defend her government’s handling of the economy.

She attacked the Congress-led UPA government for leaving a “mess” and mismanaging the economy which the Modi administration set right.

The measures taken in response to the 2008 global financial crisis by the UPA led to high inflation and ‘taper tantrums’, she said.

Sitharaman further said average GDP growth between 2014 to 2019 was 7.5% as against 6.7% during 2009 to 2014 under UPA.

Similarly, consumer price inflation was 10.3% under five years of UPA rule, while during 2014-19 it was 4.8%.

Fiscal deficit too has been contained at 3.65% of the GDP during 2014-19 as compared to 5.3% in the previous five years, she said, adding current account deficit has also improved from (-) 3.34% to (-) 1.43%.

Foreign exchange reserves have grown from $303 billion in 2014 to $411.9 billion, she said, adding NPAs or bad debt declined to Rs 8.99 lakh crore as of March 2020.

“India was one of the fragile five economies when Arun Jaitley (Modi government’s first finance minister) inherited (in 2014). It became one of the fastest-growing economies. You created a crisis, Jaitleyji and Prime Minister Modi handled it,” she said. “The 2008 financial crisis was nothing in comparison to Corona crisis of last year.” She further said the inflation rate has been checked and has never been allowed to go past the ’emotional’ level of 6% from 2014 to 2019.

On GST compensation to be paid to states following the implementation of the Goods and Services Tax (GST), the minister said there are no dues pending for a period prior to the pandemic.

For 2020-21, Rs 2.17 lakh crore is due and money was borrowed and given to states, she said and added that over Rs 30,000 crore will be released to states within March.

On reduction of centrally sponsored schemes, she said the 14th Finance Commission had increased devolution of taxes to states to 42% of all tax receipts from 32% previously. While doing so, it recommended a reduction in the share of centrally sponsored schemes.