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Context:
- Ways to revive the Indian economy
Why there is an expectation of a fiscal stimulus amongst a large section of industry and economists?
- There is no sign of revival in corporate investment or exports
- There is a slow-down in private consumption due to jobless scenario
What should the government do?
- The government should put more money in highways, railways, irrigation and other public-funded infrastructure.
- It might increase the fiscal deficit, but that problem will take care of itself once growth returns and revenues, too, show corresponding buoyancy.
- There is a requirement of public sector managers E. Sreedharan, Verghese Kurien or Narla Tata Rao to take up projects
What is the solution?
- Boosting private consumption as against public investment is a more efficient way to revive the economy
- All fiscal stimuli were not successful in providing a necessary short-term demand boost to the economy. For example, the fiscal stimuli adopted by the government post the 2008-09 global financial meltdown
What is the incumbent government’s commitment?
- Unlike its predecessor, the current NDA government has shown greater commitment to fiscal and monetary prudence
- Low inflation and stable exchange rate regime has helped attract foreign capital flows both direct as well as portfolio investment in equities and bonds.
- These flows to finance its external current account payments deficit so the government need to take calculated risk while deviating from the path of macroeconomic stability