India Recognises Need For Further Stimulus At An Appropriate Time: Sanjeev Sanyal
The government recognises the need for further stimulus at an appropriate time to perk up demand in the Indian economy, Principal Economic Adviser Sanjeev Sanyal has said.
To tackle the economic crisis brought on by the Covid-19 pandemic and consequent lockdowns, the government announced the Rs 1.70 lakh crore Pradhan Mantri Garib Kalyan Yojana as well as the Rs 20 lakh crore Atmanirbhar Bharat Abhiyan package.
Analysts, however, feel more needs to be done to address demand concerns.
“We recognise the need for providing further stimulus, on the monetary and fiscal side, at some point of time as may be appropriate,” Sanyal said while addressing the 115th annual general meeting of the PHD Chamber of Commerce and Industry in Delhi on Tuesday. This is not something new, he said, adding that Finance Minister Nirmala Sitharaman recently mentioned this.
Addressing the anxiety over low demand in the economy, Sanyal said that unlike many countries, which opted for very large upfront demand creation, India's focus was on creating a safety net for vulnerable sections of the society and businesses due to the fiscal constraints.
“If we tried to re-inflate consumption demand in April, May and June, it would have been entirely a waste of resources as we ourselves had locked down all avenues of spending,” he said. Now, with the gradual reopening of the economy, manufacturing is getting back to the pre-pandemic levels and services sector is gathering momentum.
"So as we open things up, clearly, we are in a better position to do so (announce further a stimulus package). In this context, let me say there is space both on the monetary side and on the fiscal side to do this, and a willingness to use this," he said.
Echoing similar views, KV Kamath—former president New Development Bank—said there is space on both monetary and fiscal sides for another stimulus package. He also said India has unending space and opportunity to grow at double-digit for the next 25 years.
Besides, strong foreign currency flows, low-interest rate and ample liquidity, Kamath said India’s top 50 companies are almost totally unleveraged and have the capacity to make fresh investments.
On the fear of double-digit contraction, Morgan Stanley India's Managing Director Ridham Desai said, “Our forecast is -4.7% for this year. We think that the economy is coming back and coming back very quickly.”
Desai projected that India's manufacturing sector could triple in the next 10 years as the world is entering into multi-polar from bipolar earlier.
"When we talk to large manufacturing companies, a lot of them are eager to come to India to set up manufacturing. These companies were never worried about demand in India, and therefore you can see that India has had a very steady flow of FDI," he said.