Outgoing CII President and MD & CEO of Kotak Mahindra Bank Uday Kotak spoke to CNBC-TV18 on the need for government to step up fiscal support as India battles the second wave of COVID. He also made a strong pitch for higher fiscal support to the bottom of the pyramid even if it means increasing the fiscal deficit. That's easier said than done.

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Here's from the government’s point of view:

The government has assumed a 16.5 percent growth in tax revenues this year, now that looks ambitious.

The budget assumed nominal GDP at 14.4 percent; now that looks a tad ambitious.

The divestment target was always ambitious.

The government has already announced higher fertilizer subsidy and food transfers which is an additional Rs 40,000 crore that have to be accounted for expenditure.

Even with a 6.8 percent fiscal deficit, debt-to-GDP looks set to be above 90 percent for a few years. So is it wise to spend more?

The GST compensation is bound to be tough, so there as well the government may come to borrow more.

And finally in spite of all of this, if we need more fiscal spending, where should we spend it at the bottom of the pyramid, as social net, or for stimulus.

To discuss this CNBC-TV18’s Latha Venkatesh Spoke to Ajit Ranade, President & Chief Economist at Aditya Birla Group; Aditi Nayar, Principal Economist at ICRA; Rahul Bajoria, Chief India Economist at Barclays, and Yamini Aiyar, President at Centre for Policy Research.

On fiscal spend, Ajit Ranade said, “There is need for fiscal spend because the second wave was quite unexpected and nasty in its impact and that is going to have serious effect on the economy which was not perhaps anticipated when the union budget was presented. So we must recognise that this is something which is very large and quite a lot of it was unexpected.”

“Secondly, the fiscal is line of defence, there is no other policy like monetary policy or anything else which can be effective and if we don’t do it now there is an immediacy to it. Other measures will take time to work out, we need something which impacts immediately and fiscal has that potential.”

Aditi Nayar said, “I agree that ferocity of the second wave is something that we need to address very quickly because its demand which we think is going to have a prolonged negative impact this time around and we don’t think that the bounce back in demand will be as quick as what we saw last year.”

“Having said that the fiscal situation is by no means easy but I would counter and say that it is not alarming either and there are couple of reasons for that. We have already got the data from Government of India, multiple sets of data which tells us that tax revenues in FY21 were actually a fair bit better than what the revised estimates were.”

For full interview, watch accompanying video...

(Edited by : Bivekananda Biswas)

First Published:May 28, 2021 9:11 PM IST