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‘Weak household, SMEs may need more stimulus’

The head of the International Fund Monetary Economist (IMF) Gita Gopinath attracted several positives of Indian policy actions – ranging from free food for the poor to spend on the health and attitude of the RBI.
While responding to TI’s questions through e-mail, he suggested that the government might need to provide stimulus to vulnerable households, SMEs and improve education and capital expenditure.
Quotes: Does the government need to provide greater growth of fiscal boost to spur growth? Given the ongoing health crisis, fiscal policy must provide agile and flexible policy support to respond to covideled development.
The government’s announcement to provide additional support to minimize the social costs of the pandemic, including the extension of free food rations, additional expenditure for health infrastructure and free vaccine supply to state.
In the future, additional fiscal stimulus can and must be deployed to support vulnerable households and small and medium enterprises and for other priority expenditures, such as education and support for countries for capital expenditure.
It is important that with these support, credible fiscal consolidation plans for medium to be announced because this will strengthen market trust.
Structural reform, including in the financial sector, will be needed to increase Indian growth potential.
When did you see monetary policy that is easy in the US and Europe tapered? How can the economy appear ready to meet the challenges? In our July 2021 estimate, we assume that the main central bank will leave policy levels that have not changed through next year.
If our basic prospects and fiscal policy assumptions for the US are realized, the policy level is likely to start increasing at the end of 2022 or early 2023 (with the purchase of assets upgraded again in the first half of 2022).
For the euro area, given that inflation is projected to remain below the target for a while, we hope it will take longer for the level of policy to rise there.
In India, given the negative big impact of the pandemic about growth, including as a result of the second wave, amid unprecedented uncertainty, accommodative monetary attitude RBI, coupled with adequate systemic liquidity through various instruments, remains appropriate.
Foreign exchange reserves that are quite large in India provide several pillows to abundance from recalibration of monetary policy in developed countries.
How is protectionism in India compared to other countries? Do you think this will hurt the investment needed to increase growth? In recent years, India has taken important steps to involve further policies.
Despite the Covid crisis and the increase in global uncertainty, India managed to attract significant FDI, about 2% of GDP, in 2020.
However, increasing medium goods tariffs, however, fears because the government wants to strengthen integration into the global value chain.
Further efforts to trade and investment liberalization, assisted by structural reforms can help deepen the integration in the global value chain and support Indian growth potential.

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