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Tuesday, September 29, 2020

Timing of a counter-cyclical fiscal policy to be equally important to encourage discretionary spending: CEA

Greater fiscal push in times of uncertainty may only lead to people hoarding money in their bank accounts as has been seen in Jan Dhan accounts that are being used to provide income support to poor.

By: ENS Economic Bureau | New Delhi | July 23, 2020 3:01:04 am
Chief Economic Adviser Krishnamurthy Subramanian. (File)

Even as the government understands the demands for a fiscal push to stimulate growth, the timing of a counter-cyclical fiscal policy will be equally important to encourage discretionary spending, Chief Economic Adviser Krishnamurthy Subramanian said Wednesday. Release of vaccine for Covid-19 could be an opportune time for such a policy, he indicated.

“Government is willing to do what is necessary in terms of government consumption, but timing of that is extremely important because now there is news coming that vaccine may not be very far of, once we have a vaccine the uncertainty that people have will go down significantly. Until there is uncertainty, even if people have money in their pockets, they may decide to keep it in their banks savings accounts (that’s why the increase in PMJDY accounts by about Rs 20,000 crore), he said.

Greater fiscal push in times of uncertainty may only lead to people hoarding money in their bank accounts as has been seen in Jan Dhan accounts that are being used to provide income support to poor.

Speaking at the same event, DIPAM Secretary Tuhin Kanta Pandey said restrictions on international travel due to the pandemic has affected strategic disinvestment of CPSEs, like Air India, but government is committed to pursue these.

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