India: Fiscal stimulus unlikely before end of Sep 21

• The government is unlikely to announce any new fiscal stimulus until the later part of Sep 21, government officials told Financial Express, as focus shifts to undertaking budgetary capital spending and prodding Central pubic sector undertakings (CPSEs) to invest more aggressively.
• Any Covid-19 relief package to boost demand may be approved only after a careful assessment of its necessity and hinges on the fiscal space. Additional demand stimulus at this stage when the supply side is constrained by lockdowns in certain states can potentially stoke inflation.
• The focus, now, is on targeted expenditure, with high multiplier effect, to bring back growth without straining the finances, the officials added.
• Also, the scope for further debt accumulation to keep boosting expenditure is much more limited now than a year earlier. The officials cautioned that any further debt accumulation will only weigh down debt affordability and may prompt global agencies to review their ratings or outlook of India.
• They pointed out that the Union Budget for 2021-22 already factors certain amount of demand stimulus and other relief measures.
• However, with the second pandemic wave waning, the Centre will expeditiously implement crucial Budget proposals, mainly in infrastructure. It is also open to raising its capital expenditure later this fiscal from the budgeted INR5.54tr, should there be a pressing need for it, sources said.
• This comes after finance minister Nirmala Sitharaman on 4 Jun 21 asked various infrastructure ministries and central public-sector enterprises (CPSEs) to “front-load” capex and ensure timely completion of large projects.
• Ministries were also requested to aim to achieve more than their capex targets. Sitharaman emphasised that enhanced capex will play a critical role in revitalising the post-pandemic economy.
• The Union Budget 2021-22 provided a capital outlay of INR5.5tr, a sharp increase of 34.5% over the Budget Estimate of 2020-21. The Finance Minister also asked the ministries and their central public sector enterprises (CPSES) to ensure clearance of micro, small and medium enterprises (MSMEs)’ dues at the earliest.

External Link : https://www.financialexpress.com/economy/fresh-stimulus-unlikely-in-q1-focus-shifts-to-undertaking-budgetary-capital-spending/2266272/

External Link : https://www.pib.gov.in/PressReleasePage.aspx?PRID=1724481