Strong fiscal policy support needed to kickstart growth: EY India

Strong fiscal policy support needed to kickstart growth: EY India

IANSUpdated: Wednesday, June 30, 2021, 09:43 AM IST
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Fiscal stimulus package should focus on income support measures for the vulnerable rural and urban populations, along with making provisions for additional vaccination expenditure in view of the Center's recent commitment to finance 75 percent of the country's total vaccine procurement. |

Strong fiscal policy support in the form of stimulus measures are needed to kickstart growth, EY India said.

According to the consultancy firm's June edition of Economy Watch: "The primary focus of the fiscal stimulus package should be on the health sector.

"This could ensure meeting the short-term healthcare demand arising from COVID's Second Wave and a possible Third Wave besides supporting growth and employment in the economy."

As per the report, fiscal stimulus package should focus on income support measures for the vulnerable rural and urban populations, along with making provisions for additional vaccination expenditure in view of the Center's recent commitment to finance 75 percent of the country's total vaccine procurement.

Besides, it should take care of any additional capital expenditure directed mainly towards expanding health sector infrastructure.

"Together, these add to Rs 2.35 lakh crore of which around Rs 0.65 lakh crore can be accessed by restructuring of budgeted expenditure on other heads leaving a balance of Rs 1.7 lakh crore which would constitute an additionality of 0.8 per cent points of GDP on the budgeted fiscal deficit of 6.7 per cent of estimated GDP," the report said.

"Thus, the fiscal deficit would need to be increased to 7.9 percent of GDP in FY22 so as to cover the revenue shortfall of 0.4 percent points and the expenditure additionality of 0.8 percent points of GDP," it added.

The report said that although growth is projected at 8.3 percent in 2021 for India, this masks significant expected economic damage from COVID's Second Wave.

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