Strong fiscal policy support needed to kick start growth: EY India

The report said that although growth is projected at 8.3 per cent in 2021 for India, this masks significant expected economic damage from Covid's second wave.

New Delhi: Strong fiscal policy support in the form of stimulus measures are needed to kick start growth, EY India said.

According to the consultancy firm’s June edition of Economy Watch: “The primary focus of the fiscal stimulus package should be on the health sector.

“This could ensure meeting the short-term healthcare demand arising from Covid’s second wave and a possible third wave besides supporting growth and employment in the economy.”

As per the report, fiscal stimulus package should focus on income support measures for the vulnerable rural and urban populations, along with making provisions for additional vaccination expenditure in view of the Center’s recent commitment to finance 75 per cent of the country’s total vaccine procurement.

Besides, it should take care of any additional capital expenditure directed mainly towards expanding health sector infrastructure.

“Together, these add to INR2.35 lakh crore of which around INR0.65 lakh crore can be accessed by restructuring of budgeted expenditure on other heads leaving a balance of INR1.7 lakh crore which would constitute an additionality of 0.8 per cent points of GDP on the budgeted fiscal deficit of 6.7 per cent of estimated GDP,” the report said.

“Thus, the fiscal deficit would need to be increased to 7.9 per cent of GDP in FY22 so as to cover the revenue shortfall of 0.4 per cent points and the expenditure additionality of 0.8 per cent points of GDP,” it added.

The report said that although growth is projected at 8.3 per cent in 2021 for India, this masks significant expected economic damage from Covid’s second wave.