Option of another stimulus to revive economy not closed: Top govt source

Another stimulus package to rekindle demand could be in the works, according to a top government source who said that the “option of another stimulus (package) is not closed”. The source, however, refused to provide further details.

But there are indications that the finance ministry may focus further on promoting demand in the economy after introducing several measures on Monday to incentivise consumer spending.

The moves are expected to boost demand and uplift the pandemic-hit economy, which has registered a 23.9 per cent GDP contraction in the first quarter of the year.

The indication of more stimulus in the offing came 24 hours after the government on announced a tweaked LTC policy which involved cash vouchers to buy goods and a one-time interest-free festival advance for all central government employees.

Also Read | LTC Cash Voucher, Festival Advance Transfer: How central govt employees benefit

Finance Minister Nirmala Sitharaman also announced a 50-year loan for states which would be interest-free and help boost capital expenditure. The government said these measures have the potential to boost demand by Rs 73,000 crore.

A senior finance ministry official explained that till last month the government was reluctant to plot and launch fiscal stimulus as lockdowns of various degrees driven by individual states could have stifled the efficacy of the stimulus.

“But with unlocking happening in a more uniform manner and restrictions on the movement of goods and people slowly being lifted, a stimulus of announced may be more impactful,” the official said

However, there are apprehensions over the magnitude of the stimulus as the government has not indicated any change in its attitude towards maintaining fiscal prudence, especially because the government’s fiscal deficit targets are set to be breached.

The rising fiscal deficit has already cast a shadow over the prospect of further spending by the government in future.

However, the source was not clear whether the corporate sector would be targeted in the stimulus as there has been no direct demand generation from them in the last couple of months.

Before the Centre started the unlocking process in July, there were a slew of representations by the sector to the government on what kind of stimulus measures were needed to revive the economy

On the measures announced on Monday, the general assessment was that it may end up creating only a modest temporary boost as far as consumer sentiment and economic activity are concerned.

Economists feel that the impact of the total previous fiscal support and the latest stimulus is not enough to cope with the ongoing economic crisis.

Also Read | Indian economy will bounce back with 8.8% growth in 2021: IMF



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