New Delhi: India has the fiscal and monetary space to provide a boost to demand, Principal Economic Advisor in the finance ministry Sanjeev Sanyal said Thursday, hinting that more steps could be announced in the coming months to boost demand in the economy.
Speaking in a panel discussion at the India Global Week, Sanyal said these tools will be used in the rebuild phase.
He also pointed out that India’s debt-to-GDP ratio — around 70 per cent in 2019-20 — is significantly lower than some other countries’, and added that there is space for lowering interest rates.
‘Careful not to spray money’
Sanyal also spoke about how India can step up investments in large infrastructure projects in the coming months to boost demand, and explained that India has so far chosen to announce its relief and economic measures phase-wise, rather than making all the announcements in one go.
The government and the Reserve Bank of India have announced a series of measures to support the poor and vulnerable, as well as micro, small and medium enterprises, other borrowers, and agriculture.
“We have to be very careful not to spray money. We have done it in a step-by-step approach,” he said.
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Citing the example of the United States, which provided cash relief to its citizens but did not see an equivalent demand boost as people chose to save rather than spend the money, Sanyal said there is no point in throwing a huge amounts of money, as eventually, it is borrowed money.
He also pointed out that the Indian economy is extremely stable with low inflation, a current account surplus and adequate foreign exchange reserves.
“This means that when we ramp up demand, we don’t have to worry about inflation..,” Sanyal said. “Going forward, we will begin to ramp up demand and it will be in tandem with the supply side measures,” he said.
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