Bikky Khosla | 29 Sep, 2020
A fiscal package is on the cards, the media reported
last week. The expectation seems pretty reasonable, considering past instances.
Just before Diwali in 2017, the Centre had announced GST rate
cuts on around 27 items. Then around the festival season last year, corporate
tax rate cut worth Rs 1.45 lakh crore had been announced. And so it will not be
a surprise at all if the government rolls out a similar package this festive
Reports add that this time the stimulus
may involve a bigger direct fiscal outlay compared to the previous two
packages: the Rs 1.70 lakh crore Pradhan Mantri Garib Kalyan package under
which free food grains and cash payment are provided to women and poor senior
citizens and farmers; and the Rs.
20 lakh crore Aatmanirbhar Bharat package to fight the effects of COVID-19 pandemic in India. No
doubt this is welcome news.
But skeptics question the ability of the government,
particularly at this juncture of time. A global rating agency recently viewed
that additional stimulus at this time may avert further economic downturn, but it
may challenge India’s capacity to maintain sustainable public finances and
balanced economic growth. At a time when GDP contracted by 23.9
percent in April-June and fiscal deficit for FY21 has been
pegged at 12.5 percent of GDP, this sense of caution seems quite reasonable.
All this indicates that maintaining a balance is a must
if we are to bring the economy back to a better footing. Bold moves like fiscal
stimulus, accommodative monetary stance and bank recapitalisation are
imperative if we want to return to a healthy
growth rate in post COVID -19 period, but this growth impetus must be balanced
with fiscal prudence so as to ensure macroeconomic stability. No doubt, these
are difficult times, but the worst seems already to be behind us.
I invite your opinions.