Will fiscal boost help save the flagging economy in India?

Finance Minister Arun Jaitley has reaffirmed the government’s decision to boost the flagging economy with a stimulus package.

Published: 22nd September 2017 08:04 AM  |   Last Updated: 22nd September 2017 08:30 AM   |  A+A-

Finance Minister Arun Jaitley. | PTI

Express News Service

NEW DELHI: Finance Minister Arun Jaitley has reaffirmed the government’s decision to boost the flagging economy with a stimulus package. The dilemma, however, seems to be on the size of the package.
“Anything is less, since the demand is high, and every sector needs it,” said a senior Finance Ministry official. “There will be substantial package for the core sectors. That should hasten the economic growth,” he said.

Speculations among experts and the media on size of the package ranged between Rs 45,000 crore and Rs 68,000 crore, but no confirmations came from the government. Later, tweets by the Finance Ministry quoting Jaitley said the government was aware that private investments were not picking up. “Appropriate actions will be taken at the right time,” it said. GDP numbers slipped to a three-year low of 5.7 per cent in the April-June quarter.

Analysts feel the government will struggle to boost the economy even with a stimulus package, unless it gets its policies right. “If the monetary policy is relaxed, we might be able to arrest the slowdown. Without this, the economy will not revive easily,” said Seema Sharma, economist at IIT Delhi. The impact of GST is yet to show on the economy that has already been battered by demonetisation. “Manufacturing could not kick off because of the new tax regime. It will struggle even with a stimulus,” says Sharma.

Then, there are external factors like rate hikes by the US central bank — the Federal Reserve. On Thursday, the US Fed predicted a rate hike in the short term, a move that could further hurt India’s exports and software sectors.

To get the economy rolling, implementation of key policy measures like labour reforms is essential, say experts. However, they will take time to start showing results. Does the Indian economy have the stamina to withstand the delay? It the question worrying these experts.

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