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The National Statistical Office’s latest estimates on India’s gross domestic product (GDP) for this fiscal show that household consumption demand is lagging fiscal 2020 levels by 3 per cent.
As per Crisil Research, the past few budgets have emphasised the government’s intent to drive potential growth by leaning on a mix of capex and reforms.
“But with the pandemic affecting low income segments the most, near-term measures to support incomes and private consumption are crucial to strengthen the bridge to the medium-term growth path.
“Delaying a sharp fiscal correction to make room for boosting employment and infrastructure spending is probably the best bet at this juncture,” it said.
Besides, it said Centre can create an additional fiscal space of Rs 35 lakh crore over fiscals 2022-2026, by postponing the fiscal deficit milestone of 3 per cent.
“Moreover, though nominal GDP growth is estimated to decline from 17.6 per cent in fiscal 2022 to 12-13 per cent in fiscal 2023, it remains strong. A broad-based recovery and improved compliance should also benefit tax collections.
“This, together with a gradual path of deficit reduction, can provide room to accommodate spending on supporting rural and urban employment generation – near-term consumption-supporting measures as outlined below — and to fund capex over the next four fiscals.”
It pointed out that policy support focus on incomes must continue for longer, till growth becomes broad-based and demand conditions show sustained improvement.
“The MGNREGS remains the only lifeline for the vast section of landless, informal sector and migrant workers, who have borne the brunt of repeated pandemic waves and lack of employment opportunities in urban areas. A higher allocation for the MGNREGS must be prioritised this fiscal.
“There is also merit in introducing similar employment generation schemes in urban areas, given how swathes of workers such as in urban construction and contact-based services remain un/underemployed, even if lockdowns have become less restrictive. The case for a national urban employment guarantee scheme has repeatedly been put forth by experts as well as the Parliamentary Standing Committee on Labour in its August 2021 report. The time is ripe for its realisation.”
