I DO SEE CASE FOR FISCAL STIMULUS, SAYS NITI AAYOG’S RAJIV KUMAR

NITI Aayog Vice-Chairman Rajiv Kumar has pitched for fiscal stimulus to boost growth with a rider that additional expenditure should be used only for increasing productivity and capital expenditure.

Faced with slowing economic growth, the industry has been clamouring for a stimulus package from the government.

"I do see a case for stimulus," Kumar said. He added that additional expenditure should be used judiciously. Kumar’s comments come when Finance Minister Arun Jaitley has said he did not promise any fiscal stimulus, but would respond to the emerging situation. "I have not used that phrase (fiscal stimulus). I said, we will respond to situations and your fraternity translated the word respond as meaning stimulus. So you are the ones who should be answering and not me," the minister told reporters in Washington on Sunday.

Jaitley’s remarks followed increased speculation over a possible fiscal stimulus that can go above ~40,000 crore after six successive quarters of dip in the economic growth, which slid to three-year low of 5.7 per cent in the April-June quarter. The finance ministry has pegged the fiscal deficit target for 2017-18 at 3.2 per cent of the GDP and 3 per cent for the following year. Any fiscal stimulus to boost sagging growth would push up the fiscal deficit.

On the apprehensions about the stimulus, Kumar said: “It depends on how you increase government spending. If you go and throw money away and give doles then, yes, of course it will give wrong signal.” “But if you are doing that by increasing productivity and making capital investment, for example, more roads, airports and railways, nobody can argue this will give a bad signal.”

Kumar further noted that the only issue then is, can you absorb stimulus productively. “Stimulus money should be used on increasing investment, increasing demand and improving physical and rural infrastructure.”