Spend more to beat Covid slowdown

Economic Survey 2021 wants finance minister to continue expansionary fiscal policy for demand recovery

The Centre may have to continue the expansionary fiscal policy into the next financial year to sustain the recovery in demand, the Economic Survey for 2020-21 (AprMar) said today.

"The call for more active, counter-cyclical fiscal policy is not a call for fiscal irresponsibility. It is a call to break the intellectual anchoring that has created an asymmetric bias against fiscal policy," the survey, tabled today in Parliament, said.

Fiscal multipliers are disproportionately higher during an economic crisis than during an economic boom, the finance ministry report card said.

The calibrated approach adopted by the government so far allows it the space to maintain a fiscal impulse in the coming year, it said.

Once the growth picks up in a sustained manner, the government can return to fiscal consolidation, it said.

"But, for now, fiscal policy will have to remain centre-stage to support growth in the foreseeable future."

The survey's support for an expansionary fiscal policy comes days before Finance Minister Nir

Growth leads to debt sustainability

NEW DELHI: Making a case for an optimal fiscal stance, the Economic Survey said growth leads to debt sustainability and not necessarily vice-versa. "This is because debt sustainability depends on the 'Interest Rate Growth Rate Differential' (IRGD) i.e. the difference between the interest rate and the growth rate in an economy. mala Sitharaman is due to present the Union Budget for 2021-22.

According to an Informist poll, the government is likely to set a fiscal deficit target of 5.2% of GDP in 2021-22.

The survey said based on the trends so far there is likely to be a fiscal slippage in the current financial year.

According to latest data, the fiscal deficit in Apr-Dec at 11.585 trln rupees accounted for 145.5% of the Budget estimate for the full year.

Most independent estimates project the Centre's fiscal deficit to double to 7.0% of GDP in 202021.