Tuesday, June 15

Impact of 2nd Covid Wave Undeniable, Ample Space to Look At Further Covid Relief Measures: CEA

Chief Economic Adviser K V Subramanian on Tuesday said the Centre should begin thinking about announcing another round of Covid stimulus, once covid-induced lockdowns and restrictions across states are eased. In an exclusive interview with CNBC-TV18 he said the vaccination programme is important for the trade, transport, hotel sectors to pick up. “Temporary help may be useful and is being thought about travel, hotels sectors,” he added.

“There has been an undeniable impact due to the second Covid wave. Like in the first wave, funds under Direct Benefit Transfers need to be given and should be explored again. There is ample space for us to look at how the second wave impact is panning out. We remain absolutely ready to come up with more measures if necessary,” he said.

Speaking further on measures, Subramanian said, “construction activity picked up by 15 per cent and it creates a lot of jobs. Rural poor have been impacted and MGNREGA program has been active.” Noting that it is important to keep tracking demand for work via MGNREGA to assess rural distress, he said many measures taken by the government have impacted. “When investment picks up, consumption will pick up with some lag.”

From a policy perspective, privatisation of Public Sector Banks (PSB), insurance companies is important and must be followed up, he said, adding that role of fiscal policy has become significantly more important post-COVID across the world. “We are only two months into the Financial Year, but I continue to be optimistic that the privatisation programme will move ahead.” Stating that investors have driven sustained growth across countries, especially private investors, Subramanian said the corporate tex cuts undertaken reflects this philosophy and will drive growth.

Warning against knee-jerk reactions, he urged people to have patience as the impact of corporate tax rate cut measures are felt with a lag. “Budget incorporated taxes, increase in expenditure to come up with fiscal projections; We should be looking at overall trends rather than reacting to a month or two’s data,” he said.

Speaking on lockdown impact, the CEA said GST numbers have been picking up, and tax collection has been higher than revised estimates. “Tax buoyancy has been pretty okay in the current environment,” he noted.

On the likely announcement of new measures on unlocking of lockdown in the aftermath of the second wave, Subramanian said, “When economy remained under restrictions last year, support would not have made that much difference. So it makes sense to accelerate support when the economy opens.”

Speaking on the surge in fuel prices, the CEA said, “fuel prices eventually contribute to inflation, but food prices worry me more.”

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