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Time Right For Government To Boost Spending, Widen Fiscal Deficit: Report

Time Right For Government To Boost Spending, Widen Fiscal Deficit: Report

The government in its budget had proposed to lower the fiscal deficit to 3.3% in the current fiscal year

MUMBAI/NEW DELHI: 

India’s current fragile economic conditions call for government action to boost spending in the coming financial year, allowing for a widening in the fiscal deficit to bolster growth, a senior official familiar with government policymaking said.

The government should invoke the escape clause under the Fiscal Responsibility and Budget Management Act but stay within the prescribed 0.5 per cent wiggle room allowed in an extraordinary year under the guidelines, said the official, who spoke on condition of anonymity.

“Going forward for next year, there is a need for both structural and counter-cyclical measures. For counter-cyclical measures the government needs fiscal space and the present conditions are appropriate to invoke the escape clause,” the official said late on Tuesday.

The government in its budget in July had proposed to bring down the fiscal deficit to 3.3 per cent in the current fiscal year ending March 2020 and then reduce it further to 3 per cent in 2020-21.

Most economists and market participants however see the current year’s fiscal deficit touching 3.7-3.8 per cent of the GDP, as growth has slowed drastically with the economy expanding just 4.5 per cent in the July-September quarter, its weakest pace since 2013