Increased fiscal deficit to stimulate growth: Econmic advisorMarch 6th, 2009 - 8:20 pm ICT by IANS
Mumbai, March 6 (IANS) The fiscal deficit will stimulate growth of the Indian Economy, chief economic advisor Arvind Virmani said here Friday.
“GDP growth rate for India can be reasonably forecast after the publishing of figures for agricultural output. Also by September 2009, uncertainties in the western and European markets are expected to be fully known after which governmental policies and measures are anticipated to stabilize the economy,” Virmani said at the western region annual meeting of the Confederation of Indian Industry (CII).
“In the last five years, the Indian economy has moved to high growth phase. Though there is a view that the Indian growth trajectory was led by external trade and foreign capital inflows, it is apparently a product of internal growth with an important role played by exports,” he added.
According to him, the Indian economy is “not majorly” affected by the financial crisis with India reporting a slowdown as compared to recession reported in other developed nations.
“The global meltdown of the year 2008 is a once-in-75 years phenomenon and in such circumstances, there is need to increase demand and raise fiscal deficit to provide stimulus to the economy. Accelerating government investment in infrastructure is seen as substituting the decrease in private investment,” Virmani contended.
He said the fiscal deficit of about 5 percent of the GDP is expected to be revised to 6 percent, which would act as an “automatic stabiliser” for the Indian economy.
Virmani also forecast a growth of 2.5-3 percent in the agricultural sector.
“After the first and second quarter of 2009-10, growth may be slow, but thereafter there will be improvement in the growth rate”, he said.
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