NEW DELHI The next round of economic stimulus measures could focus on infrastructure projects that can be implemented quickly and can make the economic recovery sustainable, said Rajiv Kumar, vice chairman of the federal policy think tank NITI Aayog.
Kumar said in a webinar organized by the Public Affairs Forum of India (PAFI), an advocacy platform, that the signs of economic recovery in August and September were “quite smart” and indicated that the economic contraction of this fiscal may not be as bad as suggested that NITI Aayog is in favor of infrastructure projects being the focus of the next round of stimulus measures rather than helicopter money.
Kumar welcomed the statement by economic affairs secretary Tarun Bajaj on Wednesday that the ministry has received suggestions from various ministries on further steps needed to support the economy. Kumar said that infrastructure with a short gestation period can take off and facilitate rapid capex with a strong multiplier effect.
“What you want right now is not unique. We are not looking for money for helicopters. We are looking for stimuli that can sustain growth and lead to recovery. I hope the finance ministry is focused in the same direction, “Kumar said.
Earlier in the week, Finance Minister Nirmala Sitharaman said the door was not closed to another round of stimulus. RBI Governor Shaktikanta Das said on Wednesday that the central bank was constantly striving to be innovative by announcing measures to boost liquidity and help economic recovery in sync with fiscal policy.
Kumar cited the redevelopment of the train station as an example of a short-lived infrastructure project that can take off quickly. Many economists have pointed to infrastructure projects as the antidote to economic downturn due to the multiplier effect such projects can produce. Kumar said the government has the ability to monitor projects in real time.
The RBI has projected a 9.5% contraction for fiscal year 21, which means that the latter part of the current fiscal year will partially offset the strong 24% contraction observed in the first quarter. “There are indications that we may not have a 9.5% -10% contraction as bad as previously thought, because the recovery in August and September has been quite smart,” said Rajiv Kumar.
He said the service sector, which was badly affected by the pandemic, was on track to recover. India’s Services Business Activity Index rose for the fifth consecutive month in September, from 41.8 in August to 49.8, according to IHS Markit, a provider of business information. The index was slightly below the 50 mark. A figure above this suggests growth from the previous month.
Uday Kotak, managing director and chief executive officer of Kotak Mahindra Bank and chairman of the Confederation of Indian Industry (CII), the industry chamber, said public spending must be dramatically increased on healthcare, education and sustainability, as well as infrastructure.
.
