New Delhi: The negative impact of the coronavirus outbreak on the economy will be balanced to ‘a very large extent’ by the decline in global oil prices, a senior government official said Tuesday.
The official further said he expects the economy to go on an upward trajectory in 2020-21, adding that a degree of fiscal stimulus may also be warranted to boost growth.
“We had expected that the economy had bottomed out in the third quarter of fiscal 2019-20 and the last quarter of current fiscal will see an improvement, followed by further improvement in the fiscal 2020-21.
“However, there is no denying the fact that the Covid-19’s impact on the global economy will be significant. This is bound to affect Indian economic prospect as well,” he told PTI.
On the other hand, a very bright silver lining has been provided by the collapse of oil prices, he added.
“It is well known that a decline in global oil prices has a significant upward impact on economic growth in India.
“Therefore, in my estimate the negative impact of the coronavirus will be balanced to a very large extent by positive impact of the decline in global oil prices,” the official said.
And hence, there will be likely decline in overall cost within the economy, he noted.
Benchmark crude oil prices have halved since January to around USD 30 per barrel. However, the government had on Saturday hiked excise duty on petrol and diesel by a steep Rs 3 per litre each to garner about Rs 39,000 crore additional revenue.
The official also pitched for fiscal stimulus to boost growth.
“Always, there is a need to maintain a fine balance between fiscal prudence and fiscal stimulus. But in a situation where large segments of economy are being negatively impacted due to the global coronavirus crisis, a degree of fiscal stimulus may also be warranted.
“I am sure, the actual calibration of this balance is presently being worked out in the government,” he said.
On the need to cut interest rates, the official said the RBI governor’s announcement on Monday that the central bank will do whatever it takes to maintain growth momentum was impressive.
“So I am sure, given this commitment on the part of the governor, the RBI will use monetary policy tools to accelerate growth at an appropriate time,” he observed.
India’s economic growth slowed to 4.7 per cent in October-December 2019-20.
The NSO has pegged economic growth at 5 per cent in 2019-20. The Reserve Bank had also estimated 5 per cent GDP growth for 2019-20.
The Covid-19 pandemic has infected at least 126 people in India, and claimed three lives. Globally, more than 1,50,000 people have tested positive for the deadly virus.
(PTI)
