“This will be a very difficult year in terms of the economy. We should brace ourselves for a pretty sharp decline in GDP growth. We should also brace ourselves for the fact that India’s fiscal situation may be bad, and the fiscal deficit for centre and states combined will be in double digits,” he said.
India’s January-March GDP growth sank to 3.1 per cent, a low not seen in at least 17 years. For 2020-21, many agencies, including the Reserve Bank of India, expect the GDP to contract.
has been much more severe on developing economies and India. India entered the lockdown
when the economy was already weakening quite a bit,” Subramanian said.
Subramanian said that because of the Covid-19-related slowdown, the twin balance sheet problem of banks as well as corporates will be aggravated. “Many more balance sheets will be stressed. Reviving the financial sector will be critical to economic growth going forward,” he said.
Subramanian agreed with most analyses that the actual fiscal outlay of the ‘Aatmanirbhar Bharat’ package had been less than G-20 peers and reiterated his earlier stance that the Fiscal Responsibility and Budget Management Act, as well as the terms of reference of the Fifteenth Finance Commission, will probably have to be revised and updated.
He also said that the pandemic had strengthened the case for Universal Basic Income in India. “This crisis makes it more clear that we need something like an Universal Basic Income. A poverty approach covers 10-20 per cent of the population, whereas a crisis like this affected 40-50 per cent of the population."