Economic Survey 2021 tabled in Parliament: Experts' Views

Economic Survey 2021 has been tabled in the Lok Sabha. The survey has called for more active, countercyclical fiscal policies but at the same time it is not a call for fiscal irresponsibility. DK Joshi, Chief Economist at CRISIL, Soumya Kanti Ghosh, Group Chief Economic Advisor at State Bank of India (SBI) and Ananth Narayan, Professor at SPJIMR shared their readings and outlook.

“In one line, it means that the survey is in a way recommending balancing the immediate needs for growth. So, I think what will be very important to watch is when the budget comes what kind of a glide path do we see,” said Joshi.

“What I would read from this statement is that you might have a fiscal deficit which is budgeted above 5 percent but it will gradually go down to the FRBM target in the next two-three years, That is what I would read out of it,” Joshi added.

“This argument of countercyclical fiscal policy has been made earlier also and it makes sense because fiscal policy always needs to be countercyclical but the problem in the Indian context is that it has always been pro-cyclical,” said SBI’s Ghosh.

“It is an open secret that the rating methodology may not ascribe to the fundamentals but there are also things which we must take into account that the debt to gross domestic product (GDP) ratio this year should climb to more than 85 percent and there should be some part in the budget, which says that this is the fiscal policy,” Ghosh added.

According to Narayan, the broad point the economic advisor is making is that this is the time for fiscal push. “I don’t think any of us can disagree with that. There is need for investments into things like infrastructure if you want supply chains to come into India, there is need for investments into healthcare, education, sanitation, nutrition etc – nobody can deny that – there is investment required for money to revive the financial services ecosystem and our banks.”

“The first thing which is extremely important as we advocate a fiscal push is that there has to be a lot of attention paid to the execution of that fiscal push. It has to go into productive investments, it cannot go into inflation. To that extent, it is extremely important we make a commitment to reduce our revenue deficit to zero over the next five-seven years,” Narayan mentioned.