A day after the government announced the third tranche of economic stimulus package, Deutsche Bank’s Kaushik Das said that this is the maximum space that India had. Das, however, does expect further stimulus measures to be announced in the Union Budget next year.
“These measures that have been announced yesterday, you have to see that in totality of the other measures that have been announced before as well. So, if you take all the stimulus together, it is about 2 percent of GDP and that is the maximum space in my view that the government can do at this stage without damaging the fiscal deficit too much,” he said in an interview to CNBC-TV18.
“The government has not said that this is the last round. So I think it is okay for the economy given that we are seeing recovery of growth and February we should be expecting more announcements from the government and that should help the growth momentum to sustain in the medium term,” he added.
Even with the current stimulus, the fiscal deficit is expected to go up, Das said.
“Even in this scenario the fiscal deficit is expected to go up to 8 percent of GDP for the centre and about 4.5-5 percent for the states. So we are talking of 12.5-13 percent fiscal deficit as a percentage of GDP for India. So this is the maximum space that India had,” he said.
According to Das, there is a good uptick in growth. He believes that the growth trajectory will move higher going ahead. He is expecting Q4FY21 to see a 2.5-3 percent growth in GDP.
“When we go to January-March of next year, we think we are in for a 2.5-3 percent positive growth on real GDP. April-June will get a big positive number because April-June of this year has been negative. So, on a base effect we would get close to 15-20 percent increase,” he said.
Aditi Nayar, Principal Economist at ICRA believes that the current stimulus is not pure additional fiscal stimulus but more of realignment.
“While the total actual fiscal cost of all of the stimulus measures is around 2 percent of GDP, this is not going to be fresh expenditure above the budgeted level. A lot of it is going to get absorbed within the outlay that was originally there within the budget itself,” she said.