On the fiscal deficit, he said the government will not exceed the budget estimate of 5.9% of GDP.
“So far as China is concerned, the very fact that we have a huge trade deficit with China means that China’s slowdown has very little negative effect on the Indian economy,” Somanathan told ET in an interview.
China’s economic activity data for July, released Tuesday, including retail sales, industrial output and investment, came in much below expectations, fuelling concerns over a deeper, longer-lasting slowdown in growth.
Five major brokerages Friday cut China’s economic growth forecast for the year as worries mounted over contagion from debt repayment troubles at its top private property developer Country Garden.
Somanathan said the government will continue with its capital expenditure push. The February budget steeply raised the capital expenditure outlay by 37.4% to ₹10 lakh crore from ₹7.28 lakh crore in FY23 to ramp up growth.Asked if there could be a shift to revenue expenditure instead of capex because of impending general elections in 2024, he said the government will provide budgeted funds that any ministry requires.”Capital expenditure will continue to be a priority,” he said. “Whatever we have planned for, in terms of the capex, will not be impacted because of the elections. The only question will be ability to spend – we have a clear policy.”
Import curbs
The government expects robust capital spending in the April-September period.
“In the first half, the offtake is going to be very good,” Somanathan said. “It’s likely to be in the 50-60% range. We are already now, almost six months into the cycle so you can see that there is no moderation.”
With regard to criticism of the move to impose restrictions on imports of laptops and tablets, he said the government has limited policy instruments available in view of World Trade Organization rules.
“We should understand one thing. WTO does not permit tariffs on ITA (Information Technology Agreement) items,” he said. “So if we want to encourage domestic manufacturers in a country which has 140 crore people and will buy many crores of laptops and tablets, what policy instruments are available?”
Quantitative restrictions need to be viewed in that context, he added.
Imports of laptops and tablets will require a licence from November 1.
ITA-1 products include high-tech items such as computers, telecom equipment, semiconductors, amplifiers, scientific instruments and other devices.
