Arvind Subramanian, former chief economic advisor to the government, on Tuesday, said India must plan for substantially negative growth this year and be ready to spend an additional Rs 10 lakh crore since its economy is facing a “pralay” following the new coronavirus, Covid-19, pandemic.
While speaking at an online event hosted by Indian Express, “We save for a rainy day, and when a rainy day comes, you have to spend. This is not a rainy day, this is a deluge, it’s like the Hindu pralay. This is pralay in terms of economic things … What is all this kind of, you know, prudence for? (It) is not to actually save for a rainy day, but to spend for a rainy day.”
Subramanian also didn’t consider the International Monetary Fund forecast of 1.9 per cent GDP growth for India in the current fiscal year seriously and called it “absolutely mystifying and bizarre”.
He said, “India was already weakening, the lockdown policies in India have not been any less severe than advanced countries. India has a fiscal response of less than 1 per cent of GDP while advanced counties have a response of more than 8.5 per cent of GDP. I cannot see how even allowing for the fact that India is a more dynamic economy, how India’s growth rate can’t decline by the orders of magnitude that the IMF is projecting for the advanced countries. I think the IMF forecasts for India are absolutely mystifying and bizarre … We should plan for negative, maybe substantially negative, growth rates in this financial year.”
Arvind Subramanian, who is now visiting lecturer at Harvard Kennedy School, served as the chief economic advisor to the government of India from October 16, 2014 to June 20, 2018. He was responsible for bringing out the annual Economic Survey of India, which is traditionally released prior to the presentation of the Union Budget in Parliament.
[This story was last updated at 6.05am on April 29, 2020.]