“The three major items that we import constantly fluctuate due to war,” she noted, emphasizing how geopolitical tensions are affecting India’s import expenses.
Sitharaman pointed out that India’s difficulties mirror those of businesses, with escalating import pressures coinciding with heightened consumption and reliance on intermediate and complex products.
Her statements come as conflicts in crucial regions and intensified geopolitical risks have driven up the costs of insuring ships and cargo traversing sensitive trade routes.
The additional load of elevated war-risk premiums and insurance costs has inflated the expenses for importers beyond just the crude oil prices.
Regarding the monsoon, she mentioned that it remains a yearly challenge, with worries over its adequacy and irregular rainfall patterns. The government is getting ready for a “not so good monsoon” scenario and is maintaining sufficient buffer stocks.
“No food shortages are anticipated thanks to the adequate buffer stocks, although farmer incomes may encounter stress this year,” she explained.
The minister also confirmed that fertiliser supplies for the Kharif season are well-stocked and under control. She noted that funding will be necessary for fertiliser procurement for the Rabi season, with supplies expected to commence in November.
On the topic of capital markets, Sitharaman reported that the government and the Reserve Bank of India had discussions which resulted in last week’s announcement aimed at positioning India’s bond markets as a hub for capital inflows.
“The withholding tax treatment being introduced is an initial step towards drawing more capital into bond markets,” she said, adding that while the current emphasis is on bonds, “this is not the final chapter.”
Furthermore, the finance minister revealed that the RBI has permitted public sector undertakings to secure funds from abroad within a defined framework. She highlighted that the hedging framework for overseas borrowing was initiated at the behest of the RBI, and that PSUs acquiring foreign funds would not need to fully hedge currency and exchange-rate risks, thereby granting them increased flexibility in accessing international capital.
