Finance panel flags recovery uncertainty
Members of the Committee have wide variations of opinion in nominal GDP growth projections
India’s nominal GDP growth rate in 2020-21 could range between -6% and 1%, according to members of the 15th Finance Commission’s committee on the fiscal consolidation road map, which had a videoconference on Thursday.
“There are high levels of uncertainty, both with regard to the course of the pandemic and the fiscal pressures on the economy and the trend of economic recovery,” the Commission’s Chairman, N.K. Singh, told presspersons after the meeting. He said participants in the meeting had wide variations of opinion in terms of nominal GDP growth projections, ranging between -6% and 1%, as well as on whether the economy would experience a V-shaped or Ushaped recovery.
Nominal GDP growth does not take inflation into account, and is thus higher than real GDP growth.
“In the medium term, we would like to be in the range of 8% growth, or the debt trajectory becomes very problematic,” said Dr. Singh, who felt that the Centre’s reforms as part of the Aatmanirbhar stimulus package were meant to spur such growth in the medium term, even if they did not help immediately. “The question is what is the lag with which these reforms are going to reflect in the growth rate in the medium term,” he said.
He also endorsed the Centre’s reform conditions to allow the States to exceed their current borrowing limits, though several States have objected to this.
The Commission’s high-level group on health, headed by AIIMS Director Randeep Guleria, also met on Thursday, to review its earlier recommendations in view of the COVID-19 pandemic. It has now recommended an immediate beefing up of health infrastructure in areas with a cluster of positive patients, and discussed the growing needs of rural health infrastructure, especially with migrants returning from the cities, often carrying the virus.
“There is a wide disparity between the per capita health personnel available in various States. The situation in rural Bihar and Jharkhand is dramatically different from the cities,” Dr. Singh said. The anaesthetists needed to operate ventilators are crucially missing in many rural areas, he noted, even while manufacture of the machines has increased. There were also discussions about allowing final year MBBS students to begin practising in some areas and the need for a national health service.
In the medium term, the government’s financial outlay on the health sector must increase significantly from the current 0.9% of GDP, said Dr. Singh.