Business News/ News / India/  India needs a stimulus to offset covid impact: IMF

India should ease its fiscal stance and announce a stimulus package to guard against the sharp slowdown in economic growth and job losses expected from the nationwide lockdown, the International Monetary Fund (IMF) said on Wednesday.

“In India, the fiscal stance should be eased as needed to accommodate necessary increases in public health expenditure in response to the pandemic and shield against a more severe economic downturn, using targeted and temporary measures," IMF said in its Fiscal Monitor report.

“Once the situation improves, a more ambitious, credible medium-term fiscal consolidation path is needed to bring debt and interest expenditure down. Transparency must improve and the practice of shifting spending off-budget must be curtailed," it said.

Former chief economic adviser in the finance ministry Arvind Subramanian has advocated for a stimulus package of 10 trillion, which is 5% of India’s gross domestic product (GDP), to deal with the disruption caused by the pandemic.

During a virtual meeting with Prime Minister Narendra Modi on Saturday, chief ministers also demanded a fiscal stimulus package and more financing options.

“In March 2020, the government announced a fiscal support package (0.8% of GDP) to cushion the covid-19 impact, including cash transfers, an insurance cover to medical workers and steps to strengthen food security," the Fiscal Monitor report said.

A substantial fiscal stimulus package will push up the fiscal deficit and debt-to-GDP ratio of economies, but the lack of proactive fiscal policy by governments could put them in a worse place with economic activity collapsing, IMF chief economist Gita Gopinath had warned last week.

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Updated: 16 Apr 2020, 12:09 AM IST
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