Elaborating on “virtuous cycle”, she said the government’s policy measures would also increase wages, and money will reach the rural poor through direct benefit transfer. (HT Photo)

Public expenditure on infrastructure to increase consumption and measures like labour reforms and improved social security would kick in the process of a virtuous cycle to boost the economy, finance minister Nirmala Sitharaman has said.

In a post-budget interaction on Saturday, she said the government is committed to pepping up consumption through public expenditure. “There is one route, not the only route, but one route, which is public spending, and public spending on infrastructure is clearly one of the very powerful ways in which money can reach the hands of people, particularly those who are in far-flung areas also, and that would trigger greater consumption,” Sitharaman said.

She rejected criticism that the budget ignored consumption. “We did not ignore consumption even in the last term,” she said.

Sitharaman said other measures, including policy push to micro, small and medium sector, focus on rural economy, affordable housing and labour reforms would kick in a process of virtuous cycle and pep up consumption.

Elaborating on “virtuous cycle”, she said the government’s policy measures would also increase wages, and money will reach the rural poor through direct benefit transfer. She added they will trigger greater consumption, which in turn would also lead to greater manufacturing and the economy will become more dynamic.

“There are many other things through which you are trying to help the virtuous cycle ... such as the labour reforms. ... The aim is at better labour [force], in the sense of better wages, minimum wages, better taking care of their social security and better other conditions of employment,” she said. Sitharaman added policy measures will create an ecosystem that would trigger consumption.

The budget has proposed to streamline multiple labour laws into a set of four codes to ensure that the process of registration and filing of returns would get standardised and streamlined.

Sitharaman said the government is taking measures to make non-banking finance companies healthier so that they can actively play their role in sustaining consumption demand.

Economists have expressed concerns over an economic slowdown and said subdued consumption is one of the reasons for it.

According to official data, India’s GDP fell almost a 20-quarter low at 5.8% in the last quarter of 2018-19. It brought down the full year growth estimate to 6.8%, lower than the initial estimate of 7%.

Confederation of Indian Industry president Vikram S Kirloskar said the adherence to fiscal consolidation path while providing the necessary boost to consumption, investment and special emphasis on agriculture and rural sector are steps in the right direction to take the economy to US $5 trillion mark.

“The budget announced measures such as strengthening of logistics infrastructure, stepping up efforts in rural housing. They are likely to provide a significant impetus to investment spending and consumption in the economy, which apart from boosting growth in the near to medium term, will also help generate jobs.”