Dismissing the need for a new Covid-19 stimulus, Union Finance Minister Nirmala Sitharaman stated on Monday that there is no need for a new stimulus as budget schemes are yet to kick in.
India’s Union Budget 2021–22 and fiscal policy
10 February 2021
Author: Alok Sheel, ICRIER
Government expenditure is estimated to be 17.7 per cent of GDP in 2020–21, a sharp increase from 13.2 per cent in 2019–20 and 12.5 per cent in 2018–19. From a macroeconomic perspective, the focus areas are the robustness of nominal GDP and revenue growth assumptions, the budget deficit including the stimulus component and whether the stimulus is of optimal structure and scale to bolster growth. Fiscal policy is critically important in circumstances when monetary policy is constrained by impaired bank and corporate balance sheets.
The nominal GDP growth of 14.5 per cent in 2021–22 implicit in budget projections seem reasonable considering the economy is expected to rebound on the back of sharp contraction.