With the outbreak of COVID-19 pandemic, the government announced Rs 1.70 lakh crore Pradhan Mantri Garib Kalyan Yojana, followed by the unveiling of Rs 20.97 lakh crore Aatmanirbhar Bharat Abhiyan package, which many analysts said fell short of addressing demand concern.
“However, we recognise that there is a need for providing further stimulus to the economy at some point in time as may be appropriate,” he said.
This is not something that is new, he said, adding that Finance Minister Nirmala Sitharaman recently mentioned this.
Addressing the anxiety over low demand in the economy, Sanyal said unlike many countries which may have gone from very large upfront demand creation, the approach of India was basically focused on creating a safety net, both for the vulnerable sections of society and business sector given the fiscal constraints.
“If we tried to re-inflate consumption demand in April, May, June it would have been entirely a waste of resources for the simple reason we ourselves have locked down all the avenues for spending,” he said.
With unlock taking place, he said, the manufacturing sector is gradually getting back to the pre-COVID levels and the services sector will gather momentum.
“So as we open things up, clearly, we are in a better position to do so (announce further a stimulus package). In this context, let me say there is space both on the monetary side and on the fiscal side to do this, and a willingness to use this,” he said.
Echoing similar views, K V Kamath – former president New Development Bank – said there is space on both monetary and fiscal sides for another package.
Kamath also said India has unending space and the opportunity to grow at double-digit for the next 25 years.
Besides, strong foreign currency flows, low-interest rate and ample liquidity, he said, top 50 companies in India are almost totally unleveraged and have the capacity to make fresh investment.
About the fear of double-digit contraction, Morgan Stanley India managing director Ridham Desai said: “Our forecast is minus 4.7 per cent for this year. We think that the economy is coming back and coming back very quickly”.
Desai projected that India’s manufacturing sector could triple in the next 10 years as the world is entering into multi-polar from bi-polar earlier.
“When we talk to large manufacturing companies, a lot of them are eager to come to India to set up manufacturing. These companies were never worried about demand in India, and therefore you can see that India has had a very steady flow of FDI,” he said.