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Sectoral Investment Hikes Productivity, Leads To Long-term Growth Potential: IT Minister

At the Davos summit, Union IT Minister Ashwini Vaishnaw says that the government's first priority is to make sure that India's economy is resilient

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Investment in railways, highways, power transmission and other sectors hike productivity and allow India's long-term growth potential to improve, said Ashwini Vaishnaw, Minister of Electronics and Information Technology, on Wednesday. 

While speaking in a session on "India’s Road to a USD 10 Trillion Economy" at the 53rd World Economic Forum (WEF) annual meeting, he said that it is already resulting in massive job creation, with the country adding 1.5 million people into formal jobs on average every month.

Vaishnaw added, "Those decisions have shaped the country's destiny over the last years and that has put us on a very consistent path of six to eight per cent." 

The minister also talked about the inflation that India faced due to the war in Ukraine. Notably, retail inflation decreased to 5.72 per cent in December. In November, it was 5.88 per cent, and in October 2022 it was 6.77 per cent.

"India is used to an inflation rate of five to seven per cent because a large part of the energy is imported. Inflation today is at 5.8 to 5.9 per cent which is very moderate. We were able to achieve high growth and moderate inflation because PM Modi took a pragmatic and focused approach," the minister added. 

Deadly Covid-19 pandemic—

Vaishnaw also talked about the various approaches during the pandemic and how such steps impacted the world. He stated that several nations' first approach was to send out checks and ensure that people had money in their hands so they could consume, and that consumption would lift the market.

He said, "There was major liquidity pumped in. The combined balance sheet of the United States Fed, European banks and Japanese central bank were about USD 9 trillion. This created a very quick sugar rush kind of growth, but it also brought unprecedented inflation."

"That inflation is not going away so easily. It will take time as pushing liquidy is easy  but taking it out is very difficult and always very painful, "

When the entire world was dealing with the economic crisis due to Covid, India adopted a very pragmatic approach. 

"The fiscal space that any country would have is always limited and constrained. ""Regardless of how many theories are put forth, there is no unlimited capital in the world," Vaishnaw stated emphatically. 

He stated that Prime Minister Modi used the capital that India possessed. The government made a choice that focused on consumption and support for the most vulnerable groups. "So about 800 million people got limited financial aid plus free food for almost a third year now."

With limited and focused consumption, Prime Minister Modi invested the entire country's capital in infrastructure. Railroad capex was USD 23 billion last year, and it will be USD 26 billion this fiscal year, he added.