Union finance minister Nirmala Sitharaman on Wednesday said the resurgence of the pandemic has adversely impacted the nascent recovery process in India, but maintained that the country will sail through the storm with the focus of the government on robust public health measures, timely treatment of infected persons, sound macro-economic management, and strong macro fundamentals.
The country is under the grip of the second wave and this has caused suffering for a large number of people and put a huge strain on the healthcare system, Sitharaman said at the virtual 54th annual meeting of the Asian Development Bank (ADB).
“We are thankful to the international community for their support in this hour of need. The vaccine production capacity in the country is being ramped up and more candidates are on verge of entering the commercial chain. We are confident that with expected access to critical raw materials, we would not only be able to meet our needs but also soon be back to meet critical vaccine needs of the world,” she said.
The world is facing an unprecedented global crisis with the world economy contracting last year, threatening a severe development setback and hindering progress of developing member countries towards achieving 2030 Sustainable Development Goals, Sitharaman said. “Poverty has been reduced over the years, but in 2020, an estimated 78 million people were pushed back into extreme poverty and inequality aggravated,” the minister said.
According to a Pew Research Centre report released in March, the pandemic may have shrunk India’s middle-class population by 32 million and driven 75 million below the poverty line in 2020, as a severe recession walloped Asia’s third-largest economy. The World Bank has cautioned that the pandemic is pushing millions of Indians into poverty and eroding the hard-fought gains made in the past two decades.
The finance minister thanked ADB for rising to the occasion by delivering early and rapid support to the region, first through a comprehensive covid response programme to help counter the severe macroeconomic and health impact, and coming up with a vaccine support package.
However, Sitharaman urged ADB to increase its capital base and lending to India. “India has the absorptive capacity to receive about $4 billion a year from sovereign operations and about $1.5 billion annually from the private sector financing window. This should be viewed against the backdrop that on average in the last 5 years the net sovereign inflows, excluding CPRO (Covid-19 Pandemic Response Option) loan, into India have been less than $700 million and the net non-sovereign lending has been negative,” she said.
Sitharaman also urged ADB to increase private sector financing with the debt burden on sovereigns rising. “Such financing would also help leverage the capital of ADB much better. However, the non-sovereign lending of ADB came down substantially in 2020 and is projected to stay at sub-2019 level at least for another six years. The ADB’s Work Programme 2021-23 projects a reduction in non-sovereign commitments by $32 billion over 2020-35. While we welcome the strategy to increase sector and geographical diversification in private sector lending, this rather calls for more and not less absolute lending,” she said.
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