Inflation global challenge; restoring normalcy top priority: FM Nirmala Sitharaman

Finance minister Nirmala Sitharaman said on Wednesday that restoring normalcy is a top priority for governments and industries worldwide for the next decade, as wars and skirmishes disrupt supply chains, stoke inflationary pressures within and beyond conflict zones, and crimp economic growth.

Flagging inflation as a big global challenge that knows no borders, Sitharaman called for an end to conflicts through dialogues. The minister was speaking at the Global Economic Policy Forum of the Confederation of Indian Industry (CII).



"In no way can there be enough justifiable reasons for skirmishes or wars. So, the first global priority for this decade should be to restore normalcy--sit, talk and discuss. War should be avoided. Disruption should be avoided. They are the main cause for supply chain disruptions. They are the main cause for disruptions in food value chains," Sitharaman said.

Many countries, especially the developed ones, have faced runaway inflation in the aftermath of the pandemic and the Ukraine war.

The minister rooted for blending economic priorities with political and strategic goals, underscoring the perils of ignoring the role of global politics and strategic considerations in shaping and altering supply chains currently.

She said global supply chains need to be restored, realigned or expanded in such a way that geopolitical or strategic risks are not able to threaten the wellbeing of economies. The minister dwelt on the raging global debate on diversification away from certain dominant centres of concentration. "They didn't emerge from the inefficiency of economic (theories); they emerged from economic principles being influenced by political principles. And therefore, we have to build political and strategic sense into our economic policy-making," she said.

'Blending of scale and spread'

Sitharaman called for a judicious blending of both large enterprises, and small and medium ones in a country like India to ensure the necessary "scale and spread" to spur inclusive growth and job creation.

"Scale can't just be the only criterion. Large corporations are welcome because they give the advantage of scale. But I would think in terms of scale together with spread," she said. "We need to have a blend of large corporations for scale and small ones for horizontal scale."

The minister said large companies, which are run with efficiency and based at few production centres in India, can generate only a limited number of jobs. But when smaller units are spread across the country, they produce a much larger number of employment opportunities.

According to Sitharaman, nations like India, which always have had the strength of small and medium enterprises and whose populations comprise a large percentage of youths in need of employment, would benefit from the combination of scale and spread.

Sitharaman advised against viewing climate change from the narrow prism of just emission and called for widening the discourse to include efforts to shield the poor and the vulnerable from the vagaries of weather.