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More fiscal boosters likely: Analysts

More fiscal boosters likely: Analysts
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More fiscal boosters likely: Analysts

Highlights

The central government's latest fiscal stimulus measures might not have the desired effect and more announcements are likely in the coming weeks to help revive the battered economy, according to analysts

Mumbai: The central government's latest fiscal stimulus measures might not have the desired effect and more announcements are likely in the coming weeks to help revive the battered economy, according to analysts.

Economists at SBI Research and Wall Street brokerage BofA Securities on Tuesday pegged fiscal deficit at elevated 9.5 per cent and 12.7 per cent of the GDP, respectively, saying the new measures to boost consumer demand will increase deficit by 40 basis points.

SBI Research pegged the new fiscal impact at 17.8 per cent of GDP, given that most of it is done through the RBI open market operations, and the fiscal deficit of the Centre at 9.5 per cent. The fiscal impact has been estimated after taking into account the nearly Rs 21 lakh crore fiscal stimulus package announced by the government in May. However, BofA Securities estimated it at 12.7 per cent of the GDP as it expects GDP contraction to be only 7.5 per cent for FY21. On Monday, the government announced Rs 73,000 crore direct fiscal support to generate demand.

The measures include advance payment of a part of wages to central employees and cash in lieu of LTC, and the Centre will offer Rs 12,000 crore special interest free 50-year loans to the states for capital expenditure.

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