Reason behind Need for expansionary fiscal policy, NCAER claims
NCAER helped the economy recover from the unprecedented disruptions for two consecutive years. They said the growth procedure now needs a strong expansionary macroeconomic policy push.
“This unfortunate premature fiscal compression will further extend the period of disruption before the economy can return to normal growth. The fiscal deficit is being reduced sharply from 9.2% of GDP in FY21 to 7.2% in FY22. This premature fiscal compression is quite inexplicable since there is little risk of an elevated level of sovereign debt. It is mostly domestic anyway, becoming unsustainable. ,” the think tank said.
NCAER said notwithstanding the recent rush in both retail and wholesale inflation. The headline inflation is awaited to retreat inside RBI’s band in June. Also continued to moderate till August but will register a rebound after that.
“The initial moderation will be due to a moderation in crude oil inflation from 178% in April 2021 to 119% in May 2021. However, the headline inflation may start rising again on account of a few upward risks on inflation. These are (i) rise in agricultural wages with the onset of kharif activities, (ii) a further rise in crude oil inflation (iii) sticky core inflation near the upper level of the band,” it added.