NEW DELHI: With the economy reeling under a slowdown and GDP growth below 5 per cent, the NITI Aayog and the Prime Minister’s Economic Advisory Council (PMEAC) have asked the finance ministry to loosen its purse strings and focus on spending, setting aside fiscal prudence for the time being.
“The government has a very good track record for maintaining fiscal prudence, but extraordinary situations require extraordinary measures. The general feeling is that the government should focus on spending on rural schemes and infrastructure to propel demand, and can keep aside fiscal concerns for the time being,” a member of the PMEAC said.
For the second quarter of the 2019-20 financial year, GDP growth was at a dismal 4.5 per cent.
“Analysing the GDP data, private final consumption expenditure, which is a measure of consumption demand, grew at 5.06 per cent in Q2, almost half the growth of 9.79 per cent in the same quarter last year,” the member said.
The PMEAC and Niti Aayog are going to meet officials from the finance ministry and the Prime Minister’s Office later this month to discuss measures to spur growth.
The government has estimated the fiscal deficit for the current financial year at Rs 7.03 lakh crore, aiming to restrict the deficit to 3.3 per cent of the gross domestic product (GDP). The country’s fiscal deficit hit 102.4 per cent of the 2019-20 Budget Estimate at Rs 7.2 lakh crore at the end of October, government data showed.
The muted revenue growth and fears over the fiscal deficit are putting pressure on government expenditure.
The government has pegged its total expenditure for 2019-20 at Rs 27.86 lakh crore. The total expenditure during April-October stood at Rs 16.54 lakh crore, or 59.4 per cent of the BE. Capital expenditure stood at 59.5 per cent of the BE during the April-October period as compared to 59 per cent in the year-ago period, government data showed.
Earlier, rating agency FITCH revised down its expenditure growth forecast for FY20 to 12.1 per cent (from 13.7 per cent previously), below the government’s 13.4 per cent projection.