Covid-19 to have deflationary impact due to demand evaporation: CEA

Last week, the government raised its market borrowing programme by a whopping 54 per cent of the Budget estimate to Rs 12 trillion for the current fiscal to fund a comprehensive stimulus package

Ruling out any impact of stimulus on the price situation, Chief Economic Advisor K V Subramanian on Thursday said the Covid-19 pandemic has severely dented the demand for non-essential or discretionary goods, creating deflationary conditions.

He also said that a good part of the Rs 20 trillion stimulus package is designed in a manner that the fiscal deficit remains under control.
 

"Covid has a significant deflationary impact because demand especially for non-essential or discretionary goods and services will go down significantly. Therefore, it is unlikely that there would be too much inflationary impact through fiscal deficit or stimulus package," Subramanian told