New Delhi: India's GDP growth is likely to hit a decade low of 4.5% in the current financial year ending March, and the government should stick to its Budgeted expenditure plan even if it means fiscal slippage, according to Pronab Sen, economist and former chief statistician of India.
"Whatever has been the expenditure plan, please keep it, even if the taxes (collections) fall. Let the fiscal deficit increase by that extent. I am not saying you should take additional expenditure commitments, but do not cut back on it; otherwise, it will make the situation much, much worse," Sen said.
India's GDP growth slumped to a 26-quarter low of 4.5% in Jul-Sep, following which the Reserve Bank of India cut its GDP growth forecast for the full year to 5.0% last week.
Sen expects consumption to pick up by late next year. But until then, the government should not only support the economy through its expenditure plan, but by re-orienting it so that the gestation period is shorter, he said.
"I am saying take away funds from an eight-lane highway to rural roads. I am not saying you should do it as a permanent measure. Do it for a year," Sen said.
The government has announced a host of measures to revive the economy, including a cut in corporate tax rates. However, the timing was "spectacularly bad", according to Sen.
"By doing it on a concurrent basis, you have dug yourself a (revenue) hole," said Sen, adding, “If you look at the sequence of events, (growth in) private motor vehicles (sales) hit an all-time high last year.
We splurged, but now chickens have come home to roost. The next wave of people coming into our consumer category has not happened.”
