Indian Economy Suffered ?9.57 Lakh Crore Loss From Pandemic, Its Biggest Contraction

Finance Minister Nirmala Sitaraman has said that the Indian economy suffered its biggest contraction ever because of the pandemic.

She explained that the Indian economy suffered Rs 9.57 lakh crore loss due to the pandemic, compared to a loss of Rs 2.12 lakh cr during the global meltdown in 2008-09.

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Replying to a general discussion on the Union Budget in Rajya Sabha on Friday, she stated that the objective of the budget is a stable and sustainable recovery in the economy.

Compared to the performance of the UPA government during the global financial crisis in 2008-09, she pointed out that retail inflation was 9.1 per cent during the financial crisis of 2008-09, while it is at 6.2 per cent during the COVID-19 pandemic that has a bigger impact on the economy.

"Today, in spite of the crisis, reduction of GDP, Consumer Price Index is well contained, we have managed the economy much better," the FM said in the Rajya Sabha.

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Referring to the World Economic Outlook report published by the International Monetary Fund, Sitharaman said the Indian economy is projected to grow at 9 per cent in 2022 and 7.1 per cent in 2023. No other major economy in the world is projected to grow at such a faster pace.

Sitharaman said India would be the fastest-growing major economy across the world in the coming at least three years.

"Our recovery has been fastest and sustained among all economies...," she said.

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She said the government had focused on capital expenditure because of its multiplier effect on the economy and to restore growth. "The Indian economy is projected to grow at 9% in the next financial year; the US is expected to grow at 4%," she said.

Sitharaman said the focus of the Union Budget 2022-23 is on increasing capital expenditure which would have a big multiplier effect on the economy.

She pointed out that every rupee spent on revenue expenditure has only multiplier effect of 45 paise in the year during it is spent and additional 10 paise in the following year, while every rupee spent on capital expenditure creates a multiplier effect of 2.45 rupees in the year it is spent and 3.40 rupees in the next year.

"We are spending public money for creating assets," Sitharaman said.

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On support extended to Micro, Small and Medium Enterprises (MSMEs) during the COVID-19 pandemic, Sitharaman said banks have sanctioned loans worth Rs 3.1 lakh crore under the Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector.

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