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Without more stimulus, India's GDP may contract 9% in FY21: Pronab Sen

Sen said that on the face of it, the package looked good, with roughly the kind of damage that has happened to the economy

Topics
India GDP growth | Economic stimulus | Lockdown

Dilasha Seth  |  New Delhi 

Pronab Sen
He further said that there is practically no other avenues for people to invest their excess funds at the moment

Former chief statistician Pronab Sen fears that the country’s gross domestic product (GDP) will contract astronomically by nine per cent in 2020-21 if the government does not go beyond the package announced by finance minister Nirmala Sitharaman on Wednesday.

Sen, who is the country head of International Growth Centre (IGC), told Business Standard that GDP will fall by nine per cent in FY21 if the government sticks to the expenditures provided in the Budget.

“We need to wait for more announcements to see if there is going to be any extra spending. Up to today’s (Wedensday’s) announcements, there is no stimulus at all, but the government is making sure that the production units do not go bankrupt,” he said.


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Sen said that on the face of it, the package looked good, with the total roughly the kind of damage that has happened to the economy.

The Reserve Bank of India (RBI), in consultation with the government, recently announced an increase in to Rs 12 trillion for FY21. This is Rs 4.2 trillion more than the Rs 7.8 trillion announced in the Budget to fund the rising expenditure as revenues dwindle due to the

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“The Rs 4.2 trillion extra borrowings announced recently will just be about as much to meet the budgeted expenditure target for the fiscal. It will not be one paise above that,” Sen said. He added that there was certainly scope for more borrowing. “So, the government must go beyond the budgetary allocation. As of now, the government should monetise the deficit,” said Sen. He further said that there is practically no other avenue for people to invest their excess funds at the moment.

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On the Rs 20 trillion package announced by Prime Minister Narendra Modi on Tuesday, former RBI governor C Rangarajan said this is a big package.

“I think this is a big package. We have to see what are the elements that form part of the package. One has to know how will this be financed,” he said.

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His successor in the RBI said the stimulus announced by Modi is a major move, but it will take time for the economy to revive.

On whether the government needs to come out with more stimulus, Jalan said let the government see how this package works. Then, it can decide as the Centre has a large fiscal deficit.


With inputs from Indivjal Dhasmana

First Published: Wed, May 13 2020. 23:33 IST
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