New Delhi: There are signs of a sharp recovery in the economy, 15th Finance Commission chairman N.K. Singh said Friday, citing an improvement in employment numbers, auto sector recovery and positive signs in agriculture.
In a virtual press briefing after the meeting of the Finance Commission’s advisory council, Singh said there are multiple green shoots that are visible across sectors — agriculture, manufacturing and essential services — and that the fairly rapid resumption of employment and economic activity suggests the recovery process is underway.
CMIE data had shown that 2.1 crore more people were employed during the month of May than in April.
Indian Railways data indicates that some of the migrant labourers who left for their villages are returning back to cities for work.
The Press Trust of India quoted the Railway Board chairman Vinod Kumar Yadav as saying that occupancy in trains from Uttar Pradesh, Bihar and West Bengal to big cities is increasing day by day, indicating an improving economic situation.
Occupancy in trains from UP, Bihar, WB to big cities increasing day by day, indicating improving economic situation: Chairman Rly Board
— Press Trust of India (@PTI_News) June 26, 2020
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Focus should be on expenditure
Singh said the agriculture sector was least affected by the Covid-19 pandemic, and given a normal monsoon, its recovery would be the key to the revival process.
FDI flows continue to be modest, but there is a sharp recovery in the auto sector, he added.
Singh said for the current year, the focus should be on expenditure to minimise the pain from the virus, rather than on fiscal deficit or government debt.
“This year, we must not concentrate on the fiscal deficit or debt. We must concentrate on the fastest possible revival of the economy. We must concentrate on ensuring that in terms of the painful transition, the pain is minimised through multiple interventions,” he said.
The Indian economy is expected to contract between 5 to 12 per cent in 2020-21, after the two-month lockdown brought economic activity to a near-complete halt.
Singh added the central government’s decision to increase borrowings indicates that it is unlikely to meet the 3.5 per cent fiscal deficit target for the current fiscal.
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2020 won’t be base of projections going forward
Singh also said the 15th Finance Commission is unlikely to use the current year to base its projections for the next five years, given the impact of the pandemic.
The advisory council discussed a few possible alternatives, but a final decision is yet to be taken.
The Finance Commission is mandated to decide what percentage of the divisible pool of central taxes has to he shared with the states for the period of 2021-22 to 2025-26. However, the pandemic and the subsequent expected contraction in growth and revenues has made its task difficult.
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