Sitharaman says focus on 3 'Fs' amid West Asia crisis
What's the story
Finance Minister Nirmala Sitharaman has called for a focus on what she dubbed the three "Fs": fuel, fertilizer, and foreign exchange. Her call comes amid the ongoing US-Iran conflict that is rattling global markets and pushing up costs in India. Speaking at the 37th anniversary event of Small Industries Development Bank of India in Mumbai, she said Prime Minister Narendra Modi's recent appeal to conserve foreign exchange and fuel should be seen in the context of managing external economic stress.
Fuel concerns
Fuel prices hiked for 4th time in 2 weeks
Sitharaman's warning comes as petrol and diesel prices were hiked for the fourth time in less than two weeks. In the last 11 days, petrol prices have gone up by ₹7.38 per liter. The sharp rise in fuel prices follows disruptions at the Strait of Hormuz, a key oil supply route. Since India imports nearly 85-90% of its crude oil needs, it has been among the worst affected by this surge in crude oil rates.
Forex focus
Rising crude oil prices just 1 part of challenge
In light of these developments, Sitharaman emphasized the importance of PM Narendra Modi's recent appeal to conserve foreign exchange reserves. She said, "There is a need to focus on the three Fs - fuel, fertilizer and forex." The finance minister also highlighted that rising crude oil prices were just one part of the challenge. She said fertilizer prices have also hit "unimaginable" levels while soaring gold prices are creating "some challenges" for India externally.
Economic measures
Modi urges citizens, industries to help reduce pressure on reserves
Earlier this month, PM Modi urged citizens and industries to help reduce pressure on India's foreign exchange reserves. The Prime Minister had called for avoiding nonessential imports, cutting down unnecessary foreign exchange outflows, postponing discretionary foreign travel, and even refraining from gold purchases for a year. A sustained rise in crude oil prices could widen India's current account deficit, weaken the rupee further, and push imported inflation even higher.
Economic impact
Higher fuel cost, delayed cargo, costlier shipping
Sitharaman also addressed other economic challenges arising from the Middle East crisis. She said, "For businesses and common people, it can mean higher fuel cost, delayed cargo, costlier shipping...pressure on working capital and uncertainty in export orders." However, despite these pressures, she maintained that domestic economic situation remains positive and resilient even today. Sitharaman also defended the government's handling of rising fuel prices, saying it had already taken a major revenue hit to shield consumers from an even sharper spike.
Revenue impact
Government's revenue impact due to excise duty reduction
"The government is estimated to take a revenue impact of over ₹1 lakh crore due to the excise duty reduction on petrol and diesel," she said. Sitharaman also asked public sector undertakings to rigorously adhere to a 45-day payment window for the MSME sector. She highlighted that delayed payments of over ₹8.1 lakh crore are currently locked up, impacting small enterprises' liquidity and working capital.