BofA: Govt should push for fiscal expansion, growth bottoming up

The reason for the current slowdown is high real rates in the past, and delay in recapitalisation of banks, among others

The ailing economy needs a joint effort by the government and the Reserve Bank of India (RBI) to engage in countercyclical fiscal and monetary measures, even at the risk of pushing fiscal deficit to 3.8 per cent of gross domestic product (GDP), according to Indranil Sengupta, chief economist, BofA Securities. The government has set a fiscal deficit target of 3.3 per cent for FY20.

The deficit can come down to 3.5 per cent of GDP in 2020-21, but the growth slowdown, which seemed to have bottomed out in November and December, needs some strong measures.  Such countercyclical measures would hardly be