India’s Finance Minister Nirmala Sithraman said she was confident about the state of the country’s economy and played down fears of a recession.

However, she admitted growth may have slowed, “but there is no recession, there will be no recession.” The minister spoke while taking part in a discussion in the upper house of the Parliament on Wednesday.

She reeled out numbers comparing five years under the earlier Congress party-led United Progressive Alliance’s second term from 2009 to 2014 and then Prime Minister Narendra Modi’s first term from 2014 to 2019 to claim that inflation was lower and growth higher under the latter regime.

Foreign direct investment inflows in 2009-14 were US$189.5 billion and were $283.9 billion under Bharatiya Janata Party rule in the following five years, she said, adding that foreign exchange reserves rose to $412.6 billion under the Modi regime from $304.2 billion in the Congress party era.

Allaying concerns over the revenue position of the government, she said direct tax and goods and services (GST) collections have both seen an increase in the first seven months of the current fiscal year compared with the same period last year.

Recently five opposition-ruled states expressed concern over the government’s delay in payment of the GST for the August-September period. The delays put their finances under tremendous strain as the GST comprises almost 60% of their revenue.

Slow growth

India’s growth outlook has weakened this year, with a liquidity crunch that initially started with stress in shadow banks and later spread to retail, automotive, real estate and heavy industries.

The collapse of Infrastructure Leasing & Financial Services (IL&FS), the country’s leading shadow banker, spread panic in the markets and raised borrowing costs. The wider slowdown in consumption and the financial sector is affecting private investment.

India’s economy grew 5% in the April-June quarter, the lowest since 2013, and the projections are that it may have slowed further in the second quarter, making six quarters of slowing growth, something that has not happened since 2012.

The minister blamed the low GDP growth on the stress in the banking sector caused by bad loans on one hand and heavily indebted corporates on the other. She blamed the previous Congress-led government for both the issues. She said reforms such as the Insolvency and Bankruptcy code to deal with stressed companies were yielding results.

She said the capital infusion in banks had led to a rise in liquidity and state-owned banks were able to recently disburse loans worth 2.5 trillion rupees (US$35 billion). This was part of an outreach program to increase lending across the country during the festival season. The opposition Congress party staged a walkout during the reply given by the minister on the state of the economy.

Opposition protest

Earlier in the day, Congress party leader Anand Sharma, while initiating a short-term discussion on the economic situation in the country, said the current slowdown could not be labeled as a cyclical phenomenon, as projected by the ruling party.

“In the last few years, the economy has suffered. Industry has gone down and people do not even have money to buy day-to-day articles. The situation in the rural regions is even worse,” he said.

Sharma said the gap between the rich and poor had widened in the country in the past few years and wrong decisions by the government, like the 2016 demonetization of high-value currency notes and the hasty implementation of a goods and services tax, led to the present slowdown.

He also criticized the government’s attempt to sell off state-owned enterprises. He said successive governments in the past had created such institutions over the last 70 years, but the current government was selling them off.

The government is planning to sell the state-owned airline Air India, petroleum company Bharat Petroleum Corporation Limited and a host of other state-owned companies. It has set a target of raising one trillion rupees through the sale of these units.

India’s peak festival season did little to lift economic activity last month, suggesting growth is in for yet another quarter of slowdown. Car sales fell 6.3% in October from last year, according to data released by the Society of Indian Automobile Manufacturers. Motorcycle sales were down 14.4% from a year earlier, while demand for trucks and buses were down 23.3%.

India’s factory output shrank by 4.3% to the lowest level in eight years in September, weighed down by a sharp fall in capital goods production. It’s likely that industrial production might struggle more in the coming months.