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A fiscal stimulus by the government could help boost a nascent recovery, (Mint)
A fiscal stimulus by the government could help boost a nascent recovery, (Mint)

Time is ripe for a fiscal stimulus

  • Signs of a pick-up in demand and the impending festival season make it an opportune time for India's government to announce fresh stimulus measures and help revive the animal spirits

The latest monthly economic review by the finance ministry strikes an optimistic note. The economy has gained momentum since the lifting of lockdown restrictions, and has also been helped by steps taken by the government. A consequent revival in demand is palpable in many sectors, with some reaching activity levels higher than a year ago, it notes. The view reinforces what many macro-economic indicators have been suggesting. India’s exports, for instance, grew for the first time this fiscal year in September, as did the goods and services tax revenue. India’s manufacturing purchasing managers’ index last month rose to the highest in more than eight years and rail freight-enabled revenue clocked growth in August for the first time since March.

These are all heartening signs. But uncertainty due to covid could yet harm this nascent recovery. Even though the rise in covid cases seems to have passed its peak, their numbers still are high-enough to cause continued disruptions. Growth impulses, therefore, need strengthening, and a fresh fiscal stimulus could help. To be sure, the government has been agreeable to stimulus demands although it has been waiting for demand conditions to pick-up before it announces one. Now may be the right time. Timely hand-holding just ahead of the all-crucial festive season could perhaps spark the “animal spirits" in our economy.

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