The government should provide fiscal relief that helps to repair and protect the productive capacity of the economy from the effects of the Covid-19 pandemic, former Reserve Bank of India Governor Raghuram Rajan said Saturday.
Speaking at a webinar organised by the Princeton University’s Bendheim Centre for Finance, he said India entered the pandemic-led health crisis with declining growth, poor fiscal situation and legacy NPAs in Prime Minister Narendra Modi’s first term, even as the government in the second term focussed on “BJP’s majoritarian objectives rather than repairing an impaired economy.”
He argued that providing resources for relief and repair is going to be very important and what India has done so far in terms of fiscal support is not adequate when compared with many other economies. It is going to be a slow process of recovery as emerging markets like India have not been able to provide relief the way industrial countries have.
“India didn’t fix the house and entered the crisis with a fiscal deficit of 9 per cent or so of GDP and slowing growth. Further with pandemic-related revenue shortfalls and the decline in GDP, this could rise to 13-15% of GDP even without additional spending. Also, the government is focussed on credit rating for fear of downgrades,” he said.
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