Chief Economic Adviser (CEA) KV Subramaniam says the government is ready to take more measures to boost the economy hit by the second wave of the coronavirus pandemic.
However, he said the demand for a new stimulus package should be considered against the backdrop of several initiatives taken by Finance Minister Nirmala Sitharaman in the Budget for 2021-22 presented in February.
The Chief Economic Advisor was responding to a suggestion by some industry bodies that the government needs to come up with a Rs 3 lakh crore stimulus package to boost the economy, which is hit by the second wave of the coronavirus pandemic in April-May. was badly affected.
According to an assessment by the Reserve Bank, the country has suffered a loss of about Rs 2 lakh crore due to the second wave.
“Like last year, we are very open to coming up with more measures… but I think it is really important to note the big difference between last year and this year when we talk about stimulus. Let’s do it,” he told PTI in an interview.
The CEA clarified its point that unlike the previous budget, which was prepared before the pandemic, the 2021 budget was presented amid the pandemic and already included significant financial expansion.
He said the focus is particularly on infrastructure spending leading to construction activity and later in the informal sector to create jobs and create demand. He said this was observed during the January-March quarter of the last financial year.
Significant capital expenditure by the government led the construction sector to grow 15 percent in the fourth quarter and gross fixed capital formation to 34 percent of GDP, the highest in the past six years.
Emphasizing that the ultimate objective is to ensure that the economic recovery gains momentum, he said, the government will do whatever is necessary to ensure that.
With regard to food security for the poor, he said, the government has already extended the free food program to 80 crore population till November.
He said that around Rs 70,000 crore would be spent on expansion of PM Garib Kalyan Yojana, adding free vaccination for all is another important economic measure.
“The vaccine, as you will appreciate, is by far the most important from the point of view of getting back on the path of economic recovery,” he said.
On the impact of the second wave on growth, Subramaniam said, there will be some impact but it is not likely to be huge.
The Economic Survey 2020-21, released in January this year, had projected a GDP growth of 11 per cent during the current financial year ending March 2022.
India’s economy shrank by a lower-than-expected 7.3 per cent in the fiscal year ended March 2021, after spiking growth in the fourth quarter, just before the world’s worst outbreak of coronavirus infections hit the country.
The GDP print for 2020-21 was a better than expected contraction of 8 per cent as per the Economic Survey estimates.