AFPThe National Council for Applied Economic Research (NCAER) has projected the economy to contract 12.6% during the current fiscal, a massive 14.4 percentage point downgrade from the 1.2% growth estimated in June.
Growth would remain negative throughout the fiscal, the think tank said in its Quarterly Review of the Economy report for the July-September quarter, released on Friday.
The second quarter would see a 12.7% contraction followed by -8.6% and -6.2% for the third and fourth quarter respectively, the report said.
Highlighting the uncertainty of a longer term outlook it said, “The key question is how the economy will perform thereafter. References to V-shaped recovery etc. obfuscate more than they reveal.”
In the medium-long term, India’s growth was unlikely to reach the peak output levels seen in the previous fiscal till the end of 2022-23, it said, noting this was under the ‘optimistic’ assumption of 7% growth in FY22.
“A more likely scenario is that after getting back to its previous peak output level by 2022-23 the economy will settle back to its pre-pandemic growth path of 5.8 per cent,” NCAER said.
The report pegged inflation for the second quarter at 6.6% and only a percentage point lower at 6.5% for the fiscal year, both beyond the Reserve Bank of India’s (RBI) tolerance band of 2-6%.
Coupled with the steep contraction in growth, this made the conventional approach to monetary and fiscal policy inadequate to deal with the crisis.
On the fiscal side, it estimated the combined fiscal deficit at 13% of gross domestic product (GDP) along with a total public sector borrowing requirement of 14-15% of GDP.
This in turn put pressure on the RBI, which has to enable markets to absorb this massive borrowing requirement while avoiding a spike in bond yields.
“It seems inevitable that at least a part of this borrowing will have to be monetised to avoid excessive pressure and crowding out in the financial markets,” the report said.
This called for wide ranging reforms that were “no less ambitious than the reforms of 1991”. The government should focus on maintaining the stability of the financial sector through stronger supervision of banks and financial institutions.
It also recommended resolution of non-performing assets through the creation of a bad bank, partial disinvestment and governance reforms in public banks and more effective incentives to induce lending to micro, small and medium enterprises.
Growth would remain negative throughout the fiscal, the think tank said in its Quarterly Review of the Economy report for the July-September quarter, released on Friday.
The second quarter would see a 12.7% contraction followed by -8.6% and -6.2% for the third and fourth quarter respectively, the report said.
Highlighting the uncertainty of a longer term outlook it said, “The key question is how the economy will perform thereafter. References to V-shaped recovery etc. obfuscate more than they reveal.”
In the medium-long term, India’s growth was unlikely to reach the peak output levels seen in the previous fiscal till the end of 2022-23, it said, noting this was under the ‘optimistic’ assumption of 7% growth in FY22.
“A more likely scenario is that after getting back to its previous peak output level by 2022-23 the economy will settle back to its pre-pandemic growth path of 5.8 per cent,” NCAER said.
The report pegged inflation for the second quarter at 6.6% and only a percentage point lower at 6.5% for the fiscal year, both beyond the Reserve Bank of India’s (RBI) tolerance band of 2-6%.
Coupled with the steep contraction in growth, this made the conventional approach to monetary and fiscal policy inadequate to deal with the crisis.
On the fiscal side, it estimated the combined fiscal deficit at 13% of gross domestic product (GDP) along with a total public sector borrowing requirement of 14-15% of GDP.
This in turn put pressure on the RBI, which has to enable markets to absorb this massive borrowing requirement while avoiding a spike in bond yields.
“It seems inevitable that at least a part of this borrowing will have to be monetised to avoid excessive pressure and crowding out in the financial markets,” the report said.
This called for wide ranging reforms that were “no less ambitious than the reforms of 1991”. The government should focus on maintaining the stability of the financial sector through stronger supervision of banks and financial institutions.
It also recommended resolution of non-performing assets through the creation of a bad bank, partial disinvestment and governance reforms in public banks and more effective incentives to induce lending to micro, small and medium enterprises.
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2 Comments on this Story
Prakash Ramiah6 minutes ago Exactly correct,without spike in bond yeild ,option left for infra,housing is land compensation bonds. Finance,revenue,expenditure secretaries of central,state govts should come with massive issue of one acre one crore,5 percent 5 years capital gains,tax free,gst free,assignments rights for central,stateunicipal bonds,as bharat bonds by swap , a deemed sale ,ready reckoned with circle rates using rera brokers through merchant bankers, credit ratings agencies structured for different yield,tenure for different circle rates for land and have 2 cr acre land bank at 25000 acre for each parl const.this will reduce land input and cost over run and like telangana govt digitaluse all land using dharani type portal of telangana govt.within 21 days of issue of bond listed,all land with comoetetent authorities to kick the project.govt should create a seperate land compensation authority.along these shelter commissioner should be in place to identify first flat seekers,slum dwellers and 33 0plus year old structures and distribute basic fsi free and start dual pricing of flat thru clss pmay aff hsg revamped.this housing,construction,manufacturing,infra with agri will have massive impact on growth,stability and will have accelerator and multiplier effect. | |
AGUPTA9 minutes ago stupid illiterate person heading the government is responsible for the mess, he's so shameful he will talk about peacocks, desi kurta, federalism, fitness but not the mess he has created for all Indians, he spoke many rosy things about gst, but ultimately it turned the head of government was indulging in corruption while denying states their rightful share, similarly behind demonetization and high fuel pump prices is also a big scam running into lakhs of crores, he has been murdering his own people with hunger, joblessness and poverty & comes into his own during election campaigns by blaming opposition for all wrongs, until he's removed all Indians will keep suffering |