Categories: Business

Corona virus to have deflationary impact due to fall in demand says CEA

Photo: PTI

Corona Impact ofn Economy

new Delhi. Chief Economic Advisor KV Subramanian said Thursday that the Corona Virus epidemic had adversely affected the demand for non-essential and similar items, defying inflation fears from the government's economic stimulus package, which led to deflation. ) Conditions are arising. He said that with the Rs 20 lakh crore relief package, a good thing is that it has been prepared in such a way that the fiscal situation will be under control.

Subramanian said in an interview to PTI-Language, "Kovid-19 is having a significant deflationary impact especially as demand for non-essential goods and services will come down significantly. Therefore, it is not likely that inflation will be impacted due to fiscal deficit widening or stimulus package. ”He said that the proposed stimulus package would generate demand by injecting cash into the market system which would lift the economy.

The government has announced an economic package of Rs 20 lakh crore to revive the economy from the Corona virus crisis. To raise money for this package, the government had last week raised the limit of borrowing from the market by 54 percent from the budget estimate. According to some estimates, the government may increase the fiscal deficit to 5.8 per cent of the gross domestic product (GDP) by increasing the limit for borrowing from the market. The budget had set a target of keeping the fiscal deficit at 3.5 percent of GDP.

About the proposed structural reforms, Subramanian said that Prime Minister Narendra Modi in his recent address touched on some important aspects like land, labor, law and liquidity. He said, "Land and labor are actually factors that improve the market. These are factors that have the potential to actually affect the cost of doing business. Recently there has been a lot of change at the state level. He said that Uttar Pradesh, Madhya Pradesh and Gujarat have announced fundamental labor reforms. Other states are also going to do so. Karnataka has taken one more step. Gay has risen changed the rules of the land acquisition for the business. Now you can buy land from companies directly from farmers in Karnataka. Other states can act on it.

On the economic growth, he said, India will return after the corona virus epidemic with rapid growth rather than slow growth. He said, "It is possible that too many pessimistic assessments can be made." I will be aware of that bias when deciding. When you look at the research done about the Spanish flu (1918), which was more frightening than the corona virus epidemic, there was also a direct V-shaped return.

This post was published on May 15, 2020 1:45 am

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