Home > Finance > Govt to announce measures to boost demand; fiscal, monetary headroom available: Sanjeev Sanyal

Govt to announce measures to boost demand; fiscal, monetary headroom available: Sanjeev Sanyal


Asserting that economic activity is steadily coming back on track, Principal Economic Adviser Sanjeev Sanyal on Thursday said the government will undertake measures to boost demand and there is both monetary and fiscal headroom available.

He hinted that the Reserve Bank of India (RBI) may further cut interest rates as a monetary policy tool to perk up demand.

“We have announced packages along the way and most of the packages so far have really been about cushioning the demand shock. We haven’t, so far at least, been going to the rebuild of the demand phase. We will in the future. We do have monetary and fiscal space to do that,” he said.

There is lots of monetary space as interest rates here are still significantly positive unlike western Europe, where there is zero to negative rates, he said at the India Global Week 2020.

“So, there is a significant scope for lowering interest rates in India, and the Reserve Bank has been systematically lowering interest rates…

“It takes some time for transmission, but it’s happening. Even on the fiscal front, we do have some space. Our debt to GDP ratio is actually significantly lower than that of the US, UK, or in many of the European countries,” he said.

The RBI brought down the benchmark interest rate to a record low of 4 per cent in May.

Sanyal further said there was no point in taking measures to rebuild demand during the lockdown phase as it would not have led to desired results.

“As we get into the rebuild phase, opening up the lockdown, certainly, we will be in the position to use various tools to rebuild demand…,” he said.

Beside, he said, the government has announced various supply side reforms, including in agriculture and labour.

Pointing out that the post-COVID-19 world will be fundamentally different, he said it will have its own supply chains, geo-politics and changed consumers behaviour.

“So, given all these, as a policymaker, I have to be very very careful not to simply press the accelerator on demand and try and reinflate the world we left behind. So, this is the context in which you will see our policy responses. We have included a lot of supply side measures, which is quite different from many other countries,” he said.

Participating in the webinar, Citi India CEO Ashu Khullar said the first quarter for India is going to be very difficult and probably there could be contraction of 20 per cent.

He also said the corporate results are going to be quite difficult.

However, the good news is that the supply side is easing up, he said. While there are certain supply challenges, increasingly the constraint is perhaps going to be on the demand side, he added.

Appreciating the efforts of RBI, Khullar said the central bank has been very proactive in terms of providing liquidity and cutting rates.

As a result of these measures, there are early indications of risk-taking come back in a measured manner, he added.

Source link

TAGS , , , ,
Hi guys, this is Kimmy, I started LicensetoBlog to help you with the latest updated news about the world with daily updates from all leading news sources. Beside, I love to write about several niches like health, business, finance, travel, automation, parenting and about other useful topics to keep you find the the original information on any particular topic. Hope you will find LicensetoBlog helpful in various ways. Keep blogging and help us grow as a community for internet lovers.