PM Modi Should Keep Fiscal Deficit Worry On Backburner For Covid: Adviser

India's budget gap more than doubled to 9.3% of gross domestic product in the year ended March as it spent more to cushion its economy against the pandemic, it aims to narrow the deficit to 6.8% of GDP this year.

PM Modi Should Keep Fiscal Deficit Worry On Backburner For Covid: Adviser

PM Modi's adviser said issues about fiscal space could be on the backburner.

India should not let fiscal deficit worries stop it from spending more to fight the Covid-19 crisis, an adviser to Prime Minister Narendra Modi said.

"If you have to spend money because you have to save both lives and livelihoods then that's what you have to do," Rajiv Kumar, vice chairman of the federal government's think-tank Niti Aayog, said in an interview. "Issues about fiscal space could be on the backburner."

There is a high probability of a third wave of coronavirus infections in India given what has been seen in most other countries, Mr Kumar said, by way of supporting his prescription to overlook fiscal considerations until the pandemic is curbed.

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The International Monetary Fund too is of the view that nations should continue to spend to support health-care systems and households until Covid-19 spread is controlled globally and the economic recovery strengthens. While India's budget gap more than doubled to 9.3% of gross domestic product in the year ended March as it spent more to cushion its economy against the pandemic, it aims to narrow the deficit to 6.8% of GDP this year.

That's because excessive borrowing could fuel inflation and crowd out private investment. At least one of those concerns is overdone, according to Mr Kumar.

The International Monetary Fund too is of the view that nations should continue to spend to support health-care systems and households until Covid-19 spread is controlled globally and the economic recovery strengthens. While India's budget gap more than doubled to 9.3% of gross domestic product in the year ended March as it spent more to cushion its economy against the pandemic, it aims to narrow the deficit to 6.8% of GDP this year.

That's because excessive borrowing could fuel inflation and crowd out private investment. At least one of those concerns is overdone, according to Mr Kumar.

Here are other key points from the interview with Mr Kumar:

  • The global minimum tax is a step in the right direction and should help India
  • India's exports are booming, so there's no worry of a jobless growth
  • Lag in reporting of jobs data will be reduced by removing technical glitches
  • The government is focused on disinvestment and the target would be met
     

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)