Mint’s Road to Recovery: See growth to contract 6.5% this fiscal, says Sajid Chenoy1 min read . Updated: 11 Jan 2021, 10:30 PM IST
- The Indian economy is projected to contract by 7.7% in 2020-21, the first time in more than four decades, according to the government’s first advance estimate
NEW DELHI :
Indian economy could see a contraction of 6.5% in the current fiscal, lower than the government’s latest projection of 7.7%, Sajjid Z. Chinoy, chief India economist, JP Morgan said at the Mint’s Road to Recovery series in the run-up to the Union Budget in February 2021.
The Indian economy is projected to contract by 7.7% in 2020-21, the first time in more than four decades, according to the government’s first advance estimate.
“So we actually are a little bit more hopeful than the NSO's estimate because that was based on patterns till October and two things have changed since. One is since November there has be a big pickup in government spending. We don't have the number but if you look at the liquidity pattern, this is another strong month of government spending. There seems to be a conscious change in the strategy. For the next six months, there will be stronger government spending in particular capital expenditure," Chinoy said.
He also pointed out that while the economic growth expected to be a 12% next year, due to a depressed base, the recovery will still be incomplete and away from pre-pandemic level.
In an hour-long webinar, Chinoy, along with other experts--Montek Singh Ahluwalia, former deputy chairman of the erstwhile Planning Commission of India, Dr Shankar Acharya, former chief economic advisor discussed their view on the single biggest issue that confronts the country--‘What we must do to revive our covid-crunched economy’.
According to Chinoy, the government should conduct an aggressive asset sales program in the next two or three years. The revenue from asset sales can then be used to make investment in health, education and physical infrastructure. Besides, while it is important to bring the deficit down, India shouldn’t be too aggressive in the nature of the consolidation, he cautioned.
“I think perhaps the cleanest approaches increase expenditure financed by asset sales, use the higher tax revenues in the excise duties that you've got to gradually bring headline deficit down because this is still going to be an incomplete recovery. Less incomplete than we were worried about three months ago, but still an incomplete recovery that we will not be back on pre-covid path 6-8 months from now," Chinoy said.