Finance Minister Nirmala Sitharaman on Tuesday said more debate is required on the issue of freebies. She also spoke about the strength of institutions in India, adding that a case has been made for setting up of a Fiscal Council but the existing institutions have risen to the occasion during crisis, especially during the recent COVID-19 pandemic.
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Sitharaman was speaking at a discussion held at Delhi School of Economics on the book ‘Recalibrate: Changing Paradigms’ by Finance Commission Chairman NK Singh and PK Mishra, Principal Secretary to the Prime Minister. Speaking on the sidelines of the event, Mishra said a lot of debate is going on regarding freebies but one also has to distinguish what is necessary for welfare and for improving people’s economic situation. When asked about the high inflation rate, Mishra said it cannot be looked at in a “one-dimensional way” and a holistic view has to be taken for policy purposes.
“We have to look at it (inflation) not only in one-dimensional way but it is fiscal policy, monetary policy and other policies also. Plus the economy is no more a close economy, it is external factor also. So keeping all these and taking a holistic view we have to structure our policy…right now I can’t say what’s to be expected, what’s to be done. As we go along we will structure our policy, it’s being done also during the whole Covid situation,” Mishra said.
Speaking about a chapter in the book on freebies, Sitharaman said there is a need for a wider debate on the issue. “…he (Singh) has gently waded in but carefully stayed there but not gone into discourse on freebies. So he has just said that the politics of freebies trumps the norms of such responsible behavior and says more debate is required. Absolutely well taken. Debate is required, no doubt,” she said.
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Stating that India is a country with established traditions and has a lot of institutional strength, she said “some institutions are very vibrant and some are probably less vibrant.” “But nevertheless, as envisaged in the Constitution, institutions are in place. Institutions will have to be rejuvenated periodically. I find a very powerful case being made for a Fiscal Council, which is not new to this book. NK Singh has been talking about it,” she said.
During the pandemic, she said, various institutions like the GST Council, Finance Commission, cabinet secretariat, Prime Minister’s Office and Finance Ministry played a very critical role in dealing with the situation. “This pandemic stands before us as an example, not just for us but world over there is a recognition that India managed to come out of (the pandemic). There is of course a lot more work to be done, I am not saying it’s concluded.”
“The pandemic has shown the world that India’s institutions can rise to the occasion even if it’s a Black Swan (event) and address the stress points of the economy and we could build on and give impetus to growth,” she said.
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Sitharaman also said it is time for multilateral institutions like the World Bank and International Monetary Fund to recalibrate their functioning to remain relevant in the post-pandemic world.
Speaking at the event, Singh said everything — freebies or otherwise — have to be transparently provided in the Budget, as was said by the finance minister recently. Overall strategy of economic management is the interplay between policies, personalities and politics, he said.
