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FICCI calls for capital infusion in economy to boost demand, investments

With advance GDP estimates projecting FY20 GDP growth at 5 per cent, the government needs to look at measures to infuse capital in the economy in a systematic way, says FICCI

twitter-logo BusinessToday.In   New Delhi     Last Updated: January 8, 2020  | 22:29 IST
FICCI calls for capital infusion in economy to boost demand, investments
The government has pegged GDP growth rate to slip to an 11-year low of 5 per cent in FY20

The Federation of Indian Chambers of Commerce and Industry (FICCI) has suggested that government should consider relaxing the fiscal deficit target to support capital infusion in the economy to give a boost to demand and trigger investments. With advance Gross Domestic Product (GDP) estimates projecting FY20 GDP growth at 5 per cent, the government needs to look at measures to infuse capital in the economy in a systematic way, FICCI said.

Sangita Reddy, President, FICCI said, "The GDP growth estimate for the current financial year of 5 per cent is on expected lines. The growth during the first half of the year has been moderate and we hope to see some momentum in the latter part. In fact, there are nascent signs that point towards an improvement and we need to make sure that these find a more solid footing going ahead".

The government has pegged GDP growth rate to slip to an 11-year low of 5 per cent in the current fiscal, mainly due to poor showing by manufacturing and construction sectors. The decline has been primarily due to deceleration in manufacturing, construction and mining sector growth, which are estimated to be 2 per cent, 3.2 per cent, and 1.5 per cent, respectively.

Also Read: Govt's advance estimate pegs GDP growth at 5% for FY20

The government's estimate, which is in line with the Reserve Bank of India's (RBI's) estimate of 5 per cent, is based on the GDP growth in the first two quarters of the current fiscal and other macro data. During the first two quarters of FY20, the Indian economy grew over a six-year low of 5 per cent and 4.5 per cent, respectively, which prompted the Reserve Bank of India to reduce its growth projections for 2019-20 to 5 per cent from its earlier estimate of 7.4 per cent.

"FICCI is of the view that the fiscal deficit target could be relaxed to support infusion of Rs 1.5-2 lakh crore in the economy in the coming year, as such fiscal expansion is much needed at the current juncture to give a boost to demand and trigger investments," said Reddy.

Also Read: SBI lowers GDP estimates for FY20 to 4.6% from 5%

"The nature of the economy is cyclical and when a potential recessionary cycle is foreseen, move to induct more capital into the economy to re-energise it is more important than worrying about fiscal deficit. A time-bound plan must be put in place on the mechanics to repair fiscal deficit through different measures, including disinvestment in PSUs," she added.

Referring to Union Budget 2020-21, which is to be presented on February 1, the FICCI President said the industry is expecting government to take more steps towards bridging the existing gaps and giving out positive signals to boost the sentiment, consumption and investments.

Reddy said that apart from providing cheaper loans, the government should make more efforts to increase incomes, especially in the rural areas, which can be achieved through an increase in the quantum of income support under PM-KISAN and expansion of the Direct Benefit Transfer scheme. "Steps are also required to boost construction, infrastructure and exports," she added.

"FICCI is also of the view that a significant focus on the economies of the future technologies like artificial intelligence, along with added stress on science and innovation, are also critical to add a parallel wave of growth," said Reddy.

The FICCI President said that the government must enable reforms, which will enable ease of doing business, for sustaining growth and demand. She said that a survey is being conducted across industry by the chamber to assess the sentiment of the nation and what it would take for corporate India to re-energise itself.

By Chitranjan Kumar

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