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Last updated: 27 Oct, 2020  

Rupee.9.Thmb.jpg Fresh stimulus in the pipeline!

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Bikky Khosla | 27 Oct, 2020

The Union Finance Minister last week said that the Central government has not closed the option of coming out with another round of stimulus. Days after the statement, a top finance ministry official reiterated the possibility of such a move, although without elaborating on its size, timing or other details. The economy is presently facing high level of debt and fiscal constraints, but according to some economy watchers, the Centre can – in fact, it should -- loosen its purse strings further.

The government, in May, came up with the much talked-about Rs 20 lakh crore 'Aatmanirbhar Bharat' economic package. This was followed by a number of measures in October 12 to induce government employees to spend in the upcoming festive season. Also, an additional Rs. 37,000 crore fund was announced to push capital expenditure and infrastructure development. But these decisions so far have received – besides appreciation-- also flak as many are of the opinion that the measures are inadequate.

Meanwhile, the NITI Aayog viewed that the next round of stimulus package should focus on infrastructure. This, according to the Vice Chairman of the think-tank, will have multiplier effect and can sustain growth. There is no doubt that infrastructure development is a must to revive growth. The Centre has set a target of achieving Rs 100 lakh crore investment in infrastructure by 2024-25, but several signs indicate that slowdown in government spending on infrastructure is going to be massive this year.

So, do we really need another round of stimulus! Despite the measures taken recently, both business and consumer confidence are still shaky, and we need to break the cycle of this weak consumer-business sentiment. The recent moves on LTC and bonus seem to be insufficient to create demand, which may worsen further after the festival season ends. Also, though the fiscal situation is constrained now, it is not the right time to worry about deficit as fiscal expansion is needed in times of downturn.

I invite your opinions.

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