Another round of stimulus for the Indian economy: What are the next steps?

Another round of stimulus for the Indian economy: What are the next steps?

• By Staff Writer

Another round of stimulus for the Indian economy: What are the next steps?

Top finance ministry officials have said another round of stimulus is possible, without elaborating on the size, timing or other details. ET asked economists what they’d look for in such an effort and how it can be funded. Gaurav Noronha & Kirtika Suneja look at the suggestions:

The economy is picking up, why is another stimulus needed

Recent recovery is bounceback from lockdown merge with festival spending

The first stimulus round has come to an end

Business confidence is still shaky

Recent moves on LTC, bonus insufficient to create demand

Demand may peter out after festival season ends

Despite pickup, economy to see deep contraction

GDP forecast for FY21, in %

What could the next stimulus entail?

Extend free ration scheme till March

Some support for the urban poor

Income tax benefits for spending to ensure durability of demand

Lower GST on mobile phones, cement, vehicles & parts

Clear stuck payments to govt contractors, increase capex

Capital allocation to infrastructure projects already in the works to ramp up execution/spending

Non-refundable consumption vouchers with a short validity period

What may be holding back the government?

Fiscal constraints, lack of resources

Conserving resources should Covid-19 see a second wave

High level of debt

Possible rating downgrade if more debt is raised to fund stimulus

Fiscal deficit

What about fiscal worries?

Not the time to worry about deficit

Fiscal expansion needed in times of downturn

Need to break cycle of weak consumer-business sentiment

Fiscal situation will look better once development picks up

Rating agencies keener on revival plan than fiscal prudence

How can the Centre fund the stimulus?

Centre can use Ways and Means Advances to borrow

Pledge listed PSU shares with RBI in exchange for loans

Speed up strategic sales

Deficit monetisation should be on the table, but kept as a last option

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