Home >Opinion >Quick Edit >Now is the time for new stimulus

When Reserve Bank of India (RBI) governor Shaktikanta Das recently pointed out that the economy was recovering faster than expected, some took his view with a pinch of salt. Policymakers, after all, tend to paint a rosier picture than actually is. But the latest goods and service tax (GST) collections show Das’s optimism might have been justified. Revenue from GST hit an all-time high of over 1.15 trillion in December, according to finance ministry data released Friday, surpassing the previous high of almost 1.14 trillion hit in April 2019. That December’s figure marks the third-straight month of revenue exceeding the 1 trillion mark suggests the jump isn’t a one-off. More importantly, it represents a 12% rise over the collection in December 2019. Since the economy was yet to experience the pandemic-induced disruptions back then, the sharp rise over it suggests economic activity is fast-returning, or possibly might have returned, to pre-pandemic levels.

A fulfilment of pent-up demand alone doesn’t appear enough to explain such a remarkable rebound. New demand seems to be emerging, which has been in evidence in other economic indicators as well such as automobile sales. The series of interest-rate cuts announced by RBI and other measures taken to enhance liquidity as well as credit might be to thank for it. The government would be relieved. Its caution in doling out direct stimulus and instead relying on credit guarantees invited criticism from many economists for being far too conservative. But with the economy humming along, New Delhi will have reason to justify its approach.

It, however, now needs to unleash the firepower thus far saved. A good dose of consumption-inducing stimulus in the budget could help utilize spare capacity and make businesses dust-off investment plans. Without that, it might yet be hard to sustain the recovery and help the economy move into higher gear.

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