Experts suggest fiscal measures to boost demand amid pandemic
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This targeting spending is also required for contact-based services that have borne the brunt of the pandemic since last year, economists said even as they acknowledged limited fiscal space for the government.
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Fiscal measures such as direct cash transfers, enhanced allocation under rural job guarantee scheme, free foodgrain distribution, modest cuts in excise duty on fuels, and expedited vaccination are crucial to overcome the second wave of Covid-19, top economists have said.
It is crucial to support rural and urban demand because the economic impact of the pandemic this time will be more on demand impulse than on supply-side disruptions amid an intensification of infections in rural areas, they said.
Spend, government, spend, to trigger growth
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Last Updated: May 27, 2021, 11:25 PM IST
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Higher spending is needed to contain the toll on the economy due to lockdowns in the second wave of the pandemic.
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What about the fiscal deficit? India is a young, growing country, and growth will generate the resources to pay off debt. The point is to feed and sustain growth.
At this juncture, says the RBI Annual Report, the Indian economy is at a cusp. A combination of public and private investment can lead on to fast growth. However, private investment has been timid, and public investment has to has the added role to play of crowding in private investment, even as it increases capital formation out of budgetary resources. RBI’s insight is no recondite truth. The sentiment is widely shared by industry as well, as reflected by banker and CII President Uday Kotak’s call for one more round of fiscal stimulus.
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The second COVID wave has brought back another round of lock-downs and its associated consequences. In fact, it has hit the country with such severity that case-load and fatality per day have reached a new high. While COVID 2.0 has been less disruptive for carrying out economic activities than COVID 1.0, its impact on the economy will be felt more through the loss of demand impulse than supply-side disruptions, says a research note.
In the report, India Ratings and Research (Ind-Ra) says, the loss of demand-side impulse is expected to be more pronounced in rural areas than in urban areas, notwithstanding Indian Meteorological Department (IMD)’s forecast of a near normal monsoon in 2021.