{"id":67127,"date":"2020-10-23T18:02:52","date_gmt":"2020-10-23T12:32:52","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=67127"},"modified":"2020-10-23T18:02:52","modified_gmt":"2020-10-23T12:32:52","slug":"fiscal-stimulus","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/fiscal-stimulus\/","title":{"rendered":"Fiscal stimulus"},"content":{"rendered":"<p><strong>What is the state of economy?<\/strong><\/p>\n<ul>\n<li>The OECD expects the world economy to shrink by as much as 7.6 per cent in 2020. India\u2019s full-year economic contraction is estimated between 9 and 12.5 per cent.<\/li>\n<li>The pandemic has severely impacted both demand and supply.<\/li>\n<li>With two years of slowdown the balance sheet of both the government and the industry has already strained.<\/li>\n<li>The banking system is in deep distress to support growth.<\/li>\n<li>All the four engines of growth (Private consumption, Exports, domestic consumption, government spending) are declining.<\/li>\n<li>The pandemic has forced most central banks and the governments to announce large stimulus to ensure rapid post-Covid recovery.<\/li>\n<\/ul>\n<p><strong>What were the steps taken by government to revive the economy?<\/strong><\/p>\n<ul>\n<li><strong>Tight fisted approach<\/strong>: The government has chosen structural reforms and debt support, rather than offering large scale stimulus to revive the economy or a GST rate-cut, to revive economic growth.<\/li>\n<li><strong>Agri-reforms<\/strong>: It has brought in agriculture reforms to boost the farm sector growth.<\/li>\n<li><strong>Conditional Loans<\/strong>: It has allowed the cash-strapped States, to borrow more but on conditional basis. For example, undertaking reforms like ending free power to farmers.<\/li>\n<\/ul>\n<p><strong>Why government is not resorting to Fiscal stimulus?<\/strong><\/p>\n<ul>\n<li>The stimulus offered so far is just 1.2 per cent of GDP whereas Japan\u2019s stimulus stands at 21.1 per cent of GDP and US\u2019 at 13.2 per cent.<\/li>\n<li>The government strongly believes of a V-shaped recovery is in progress but it is unclear whether this recovery will sustain.<\/li>\n<li>The government is worried that any fiscal stimulus if provided will have same impact that of the 2008 stimulus which caused sustained inflation.<\/li>\n<\/ul>\n<p><strong>What is the way forward?<\/strong><\/p>\n<ul>\n<li>It is clear that without a strong stimulus, the recovery will be slow.<\/li>\n<li>Only a sustained increase in demand will push the industry to start investing again.<\/li>\n<li>If that happens, three of the four engines of growth will fire (public consumption, private investment and government spending) causing economic growth to return.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>What is the state of economy? The OECD expects the world economy to shrink by as much as 7.6 per cent in 2020. India\u2019s full-year economic contraction is estimated between 9 and 12.5 per cent. The pandemic has severely impacted both demand and supply. With two years of slowdown the balance sheet of both the&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/fiscal-stimulus\/\">Continue reading <span class=\"screen-reader-text\">Fiscal stimulus<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[9],"tags":[],"class_list":["post-67127","post","type-post","status-publish","format-standard","hentry","category-public","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704864597},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/67127","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=67127"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/67127\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=67127"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=67127"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=67127"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}