Chief Economic Advisor (CEA) KV Subramanian has cautioned against the demands of a stimulus similar to developed nations saying that it would come at a huge cost to the economy. "There is no free lunch," Subramanian told The Economic Times. Monetising the fiscal deficit will have an impact on macro fundamentals and the economy would incur significant costs, Subramanian added.
Making comparisons with stimulus packages provided by the governments in other countries is invalid, he said. Countries such as the US have ability to provide massive stimulus measures since dollar is the global reserve currency, he said. The actual stimulus provided by nations in the sovereign rating category as India is far lower, the economist noted.
Adding, he said that GDP is expected to contract in first quarter of fiscal year 2020-21 owing to coronavirus crisis. However, the GDP is likely to see a strong rebound in second half and grow at 2 per cent for complete FY21, Subramanian added. The government may announce a stimulus soon, he also said.
In a recent interview to news agency ANI, Subramanian had said that the economy is likely to rebound in the second quarter as industries resume their operations and migrant workers get back to their jobs. He had also said that Indian exports are bound to see a hit amid weak global economic scenario.
Subramanian said it was time for Indian industries to revamp strategies and adopt modern technologies to compete on a global scale as various multinational corporations planned to move out of China. On India Inc asking for a fiscal stimulus, Subramanian said that India has to take into account its ground realities before committing to such demand rather than following models of Britain or the US.
In March, India outlined a Rs 1.7 lakh crore economic stimulus plan providing direct cash transfers and food security measures to give relief to millions of poor hit by coronavirus lockdown.
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