The Centre is likely to wait for the development of a COVID-19 vaccine before committing to any further “fiscal push” to revive the economy, according to Chief Economic Advisor (CEA) Krishnamurthy Subramanian.
After he addressed a webinar organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) on Wednesday, Dr. Subramanian was asked whether the government was planning any further fiscal measures as part of an economic stimulus, as opposed to monetary and credit-based measures which have so far dominated the Centre’s response to the crisis.
The CEA responded that the government was willing to do whatever was necessary to drive consumption, but added that at a time of uncertainty, people were unwilling to spend. He cited higher balance data from Jan Dhan accounts to argue that people are more inclined to save than spend during the pandemic, thus flattening demand.
“The question is not about if, but when,” he said, regarding a fiscal package. “Once we have the vaccine, then the uncertainty that people have will go down significantly. If the vaccine comes through in the next few months, then the time will be right for a fiscal push as it will generate demand for even discretionary spending. The timing is important so that the bang for the buck is maximised.”
Industry groups have been demanding immediate fiscal measures as a necessary step to boost demand, and support vulnerable small businesses.
Earlier this week, scientists at Oxford University said they have had encouraging results in early trials for a vaccine which seems to be safe and induces an immune reaction. However, the experimental vaccine is still at a trial stage.