IMF’s 1.9% growth projection for India in FY21 a reasonable estimate, says CEA Subramanian

The Print
Dated: April 21, 2020
By: Remya Nair

The Indian economy’s performance will pick up in the second half of the fiscal, and the International Monetary Fund (IMF)’s projection of a 1.9 per cent growth for India in 2020-21 may be a reasonable estimate, Chief Economic Advisor Krishnamurthy Subramanian said Monday.

In a conversation with ThePrint’s Editor-in-chief Shekhar Gupta, Subramanian said, “There will be an adverse impact on the Indian economy due to Covid-19. The IMF estimate of 1.9 per cent growth (in 2020-21) is a reasonable estimate.”

He added, “The growth in the April-June quarter will be badly hit. The next quarter will be better and economic performance should pick up in the second half of the year.”

Subramanian pointed out that consumers who have postponed their discretionary spending, like buying homes or cars, are likely to resume purchases once the situation improves.

The CEA also said that the Narendra Modi government is looking at attracting foreign investors to purchase locally issued government debt to finance its fiscal deficit and the much-anticipated Covid-19 fiscal stimulus package.

A stimulus package for micro, small and medium enterprises and start-ups is likely to be announced soon, he said.

The government is considering a reduction in customs duties on intermediary products like raw materials to encourage ‘Make in India’ at a time when global companies are looking to move their production base out of China in the aftermath of the Covid-19 pandemic, said Subramanian.

The Modi government and the Reserve Bank of India (RBI) have taken a series of steps to protect the economy from the Covid-19 fallout. While the government announced a Rs 1.7-lakh crore package of cash transfers and free foodgrains last month, the RBI has sharply cut policy rates, allowed a three-month loan moratorium and provided liquidity to stressed sectors like non-banking finance companies.

The government is now working on a second stimulus package looking to protect the worst hit sectors, and an announcement is expected to be made soon.

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