Open to imparting more stimulus to economy: FM Sitharaman : 20-10-2020

Finance minister Nirmala Sitharaman on Monday indicated that the government might unveil another round of economic stimulus at an appropriate time this fiscal. She also hinted that the strategic sectors identified for a near-comprehensive privatisation policy would be made public soon.

“I have not closed the option to come out with another stimulus,” she said responding to a question at an event in Delhi. “Every time we have announced one, it’s been after a lot of consultations…then we sit and work it out within the ministry, with the PMO and then, take a final call,” the minister said.

Batting for more fiscal spending, chief economic adviser Krishnamurthy V Subramanian last week said a boost to the infrastructure and employment-related programmes like the creation of an urban job guarantee programme would help pep-up consumption demand. The Covid-ravaged economy will likely shrink by a record 9.5% in the current fiscal, Subramanian said, as he agreed with the central bank’s latest assessment of the magnitude of growth slump.

“We have only now started doing some kind of an assessment (on GDP) because we waited for the commencement of the second half (H2FY21), which is just started…..we will have to come up with a statement (on GDP growth/contraction for FY21),” Sitharaman said after she released “Portraits of Power” a book, authored by 15th Finance Commission chairman N K Singh.

According to the privatisation policy announced by Sitharaman recently, at least one enterprise in a ‘strategic sector’ will remain in the public sector, but the private sector will also be allowed. To minimise wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be only one to four, others will be privatised or merged or brought under holding companies. While the Modi-government has already initiated strategic disinvestment, the new policy will give a comprehensive framework and provide the ground for a road-map of privatization for years to come.

On October 12, Sitharaman sought to create additional demand of `1 lakh crore in the economy in the current financial year, through a clutch of steps that may involve less than `40,000 crore or a tenth of the amount to be saved via expenditure controls already announced, as a budgetary cost to the Centre.

The stimuli announced earlier had an estimated budgetary cost of around `3 lakh crore. The spending curbs on departments for the April-December period is estimated to result in savings of nearly `4 lakh crore. Given that even the stimulus cost would actually be lower than the estimate and considering the possibility of an extension of spending curbs to Q4, the government still has considerable room for unveiling another round/s of stimulus, without altering the estimated budget size for the year or the enhanced gross borrowing limit of `12 lakh crore.

With net tax revenues declining 30% on year in April-August (the budgeted growth was 21% in FY21 over the actual of FY20), some analysts see fiscal deficit even doubling from the budgeted target of `8 lakh crore. The April-August fiscal deficit already touched 109% of the full-year target.

Source : Financial Express

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