CII cautions against increasing fiscal deficit to spur coronavirus-hit economy

05 Jun 2020 Evaluate

Amid the call for higher public spending to spur growth, the Confederation of Indian Industry (CII) in its agenda document 2020-21 has sounded a note of caution saying that the government should guard against increasing fiscal deficit that may prompt rating downgrade resulting in other consequences for the economy. The CII also refrained from making an estimate on economic growth this fiscal year given the uncertainty of the situation against the backdrop of COVID-19 pandemic. It mentioned there is currently a consensus amongst economists that the Indian economy will witness a contraction in 2020-21, the question is how deeply negative the growth is likely to be.

Observing that government spending has been supporting the economy over the last few years, the CII said for substantive economic recovery to kick in, government spending would be crucial. Further, it said the coronavirus-induced lockdowns, wherein economic activity came to a virtual standstill, will deepen the slowdown sharply. It said ‘the Indian economy is expected to contract this year, an outcome that we have experienced only five times in the last 70 years.’

With the Indian economy entering the Unlock Phase 1.0, economic activity is expected to pick up. However, it is difficult to say what will be the shape of the recovery, it said while highlighting that the need of the hour is for government and industry to work together to return to a sustainable growth path. Besides, CII said the country is witnessing reverse migration with migrant workers going back to their hometowns. It said ‘we should take this as an opportunity to create more geographically distributed model of development and programmes like the Backward District Development Programme need to be expanded.’

It added getting growth back is essential to protect and generate jobs and livelihoods. Lakhs of migrant workers moved back to their home states, mainly Uttar Pradesh, Bihar and Jharkhand, as the lockdown which started on March 25 halted economic activities in the country. The CII has outlined a 10 Point Roadmap to revive growth and navigate the challenges of loss of lives and livelihoods posed by the global pandemic COVID-19 that has forced countries across the world to reset their growth paths.

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