India’s growth rate may dip to 7% due to third COVID-19 wave: Abhijit Banerjee

Nobel laureate and noted economist Abhijit Banerjee said that the impending third wave of the coronavirus pandemic is likely to affect India’s GDP adversely. Banerjee stated India’s growth rate could go down to 7 per cent, which is below the International Monetary Fund’s recent 9.5 per cent projection. The Nobel laureate, who heads West Bengal’s Global Advisory Board (GAB), mentioned boosting a state’s economy is directly related to the revival of the country’s economy.

The IMF slashed its economic growth projection for India to 9.5 per cent for the fiscal year ending March 31, 2022 as a severe second wave skewered economic recovery. “The economy is going slow due to the COVID-19 situation. Earlier, the IMF had said GDP growth would be 12.5 per cent. Now it is saying it would be 9.5 per cent. I apprehend it might go down to 7 per cent. Another wave will decrease it further. If the country’s economy does not improve, the state will not be able to move forward alone,” Banerjee said. He added Bengalis also work in other states and a lot of the state’s income comes from migrants.

The economist implored the Central government to invest more in free-spending policies like the US and Europe rather than bothering about deficit balancing and budget. “The (union) government has a fiscal problem, and it may have more faith in balancing the budget than free-spending policies. The government is trying to use the one instrument it has other forms of tax collection are not necessarily keeping pace, given the economy is slow. It is using this to balance the budget,” Banerjee said on Centre’s decision to raise cess on various items including fuel.

He, however, applauded the Centre for finally moving in that direction. “The inflation is already up due to the high fuel prices. I think there is a good case for being more open-handed. But to be fair, the central government has now moved towards that direction and has announced several relaxations. I think being less mindful of the deficit might be the right strategy,” the Nobel laureate said.

Edited by Mehak Agarwal; with PTI inputs

Also read: Govt panel calls for tweaking norms to help pension funds invest in growing list of unicorns