Booster dose – The Hindu BusinessLine

Clipped from:

The Centre will need to step in with measures to support demand and revive private investment

The Centre would do well to pay attention to the Reserve Bank of India’s grim prognosis of near-term economic conditions and to move fast in implementing fiscal measures to put the economy back on the path of sustained growth. The RBI’s Annual Report for 2020-21 has identified sluggish private investment as the missing link in reviving the economy and says that its linkages to other segments of the economy will enable durable growth. The central bank also points out that the government had played a large role in the economic revival last year and it is time that private sector too does the needful. Private consumption that accounts for 56 per cent of the economy had contracted sharply last fiscal due to the pandemic and government consumption expenditure had acted as a cushion to smooth aggregate demand. The government also accelerated its capital expenditure, causing a revival in gross capital formation that enabled the overall economy to move from contraction to growth in the third quarter of the last fiscal year.

The Centre may also have to design a support package for service industries such as airlines, hotels and tourism that took a big hit in the first wave and were struggling even as the second wave set in. Given the debilitating impact of the virus, the Centre may have no choice other than to spend or forego revenue, to help the economy get through this very difficult phase.

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