As per NITI Aayog Vice- Chairman Rajiv Kumar, the country needs to thoroughly prepare itself for “greater uncertainty” in terms of low consumer as well as investor sentiments due to the second wave of coronavirus infections.
He also maintained that the government will have to respond with strong fiscal measures as and when required to revive the consumer and producer sentiments, which are the key drivers of the economy.
Mr. Rajiv Kumar, not denying the plausibility of adverse conditions in India, actively acknowledged that the current situation presents a far more difficult picture, compared to the past. But it is to be noted that while showing pragmatism, Mr. Kumar remained hopeful that the country’s economy, no matter what, will grow at a significant 11% in the current fiscal ending March 31, 2022.
It is no news that India is grappling with spiraling number of COVID-19 cases as well as related deaths. This has emphatically forced many State governments to put in place stringent restrictions on mobility of people in order to curb the spread of the virus.
Stating the facts, Mr. Kumar maintained that India was on the verge of defeating the virus completely but ominous, new strains from the U.K. and other countries emphatically made the situation far more difficult.
Kumar, in his interview to PTI, held on 18th April, stated that “Apart from their direct impact on some sectors like the services sector, the second wave will increase the uncertainty in the economic environment which can have wider indirect effects on economic activities. So, we need to prepare for greater uncertainty, both in consumer and investor sentiments,”.
At a time of crippling economy, a robust fiscal stimulus can help revive the economy and help relieve consumer’s exacerbated pain. To a query on whether the government is considering coming up with a fresh stimulus, the NITI Aayog Vice-Chairman stated that the question lay in the domain of the finance ministry, which can only be answered after finance ministry’s analysis of the direct and indirect effects of the Covid.
Additionally, NITI Ayog Vice Chairman stated that “And as you have seen from RBI’s response, the expansionary policy stance has been continued and I am sure the government will respond with necessary fiscal measures also as and when it is necessary,”.
As it has been reported earlier, the Reserve Bank of India had left the benchmark interest rate unchanged at 4% and had decided to maintain its accommodative stance to boost the economy.
Additionally, in 2020, the Union government had announced the ambitious ‘Aatmanirbhar Bharat’ package to perk up the economy. It is to be noted that the overall stimulus was estimated to be more than 13% of the national GDP, which amounted to around ₹27.1 lakh crore.
In its last policy review, the RBI had projected a growth of 10.5% for FY’22 while the Economic Survey, which was tabled in the Parliament earlier this year, estimated 11% growth during the year.
Other forecasts
But it is to be additionally noted that the Leading firms and rating agencies have downgraded India’s GDP growth projections for the current fiscal year to as low as 10 per cent, after threatening local lockdowns were placed in the economy.
Where on one hand, Nomura has downgraded projections of economic growth for the current fiscal to 12.6 per cent from 13.5 per cent earlier, JP Morgan and Goldman Sachs on the other hand now projects GDP growth at 11 per cent from 13 per cent earlier.
UBS sees 10 per cent GDP growth, down from 11.5 per cent earlier and Citi has downgraded growth to 12 per cent.
As aforementioned, the RBI has projected 2021-22 GDP growth at 10.5 per cent, while IMF puts it at 12.5 per cent. The World Bank sees 2021-22 growth at 10.1 per cent. The country’s economy is projected to contract by 8% in 2020-21, as per official estimates.