Government is open to more measures to stimulate economy, says CEA KV Subramanian
The government is ready to come up with more measures to stimulate the economy which was hit by the second wave of the coronavirus pandemic, Chief Economic Advisor (CEA) KV Subramanian said.
He added, however, that the demand for a new stimulus package must be considered in the context of a host of initiatives taken by Finance Minister Nirmala Sitharaman in her budget for 2021-2022 presented in February.
The chief economic adviser was responding to a suggestion by some industry bodies that the government should come up with a Rs 3 lakh crore stimulus package to stimulate the economy which has been hit hard by the second wave of the pandemic of coronavirus in April-May.
According to an estimate by the Reserve Bank, the second wave cost the nation around Rs 2 lakh crore in terms of lost production.
“Like last year, we remain very open to the idea of proposing more measures as well… but I think it is really important to take into account the big differences between last year and this year when we talk about relaunch, ”he said. PTI in an interview.
Elaborating on its point, the CEA said that unlike the previous budget that was drawn up before the pandemic, the 2021 budget was presented in the midst of the pandemic and had already incorporated a significant budget expansion.
Particular emphasis is placed on infrastructure spending which leads to construction activities and subsequently to informal sector job creation and demand generation, he said. This was observed in the January-March quarter of last fiscal year, he added.
Large government investment spending led to a 15 percent increase in the construction sector in the fourth quarter, and gross fixed capital formation to GDP jumped to 34 percent, the highest in six years.
Stressing that the end goal is to ensure that the economic recovery accelerates, he said, the government will do whatever is necessary to achieve it.
Regarding food security for the poor, he said, the government has already extended the free food program for a population of 80 crore until November.
Prime Minister Garib Kalayan Yojana’s extension would cost around 70,000 crore rupees, he said, adding that free vaccination for all is another important economic measure.
“As you can appreciate, the vaccine is by far the most important point of view in getting back on the path to economic recovery,” he said.
As for the effect of the second wave on growth, Subramanian said, there will be some impact, but it probably won’t be very large.
The 2020-21 Economic Survey released in January of this year forecast GDP growth of 11% in the current fiscal year ending in March 2022.
India’s economy contracted 7.3% less than expected in the fiscal year ended March 2021 after growth rate picked up in the fourth quarter, just before the world’s worst outbreak of coronavirus infections does not hit the country.
The GDP impression was better than expected, a contraction of 8% for 2020-2021, as predicted by the Economic Survey.