CEA signals no major govt stimulus likely for economy

NEW DELHI: Chief Economic Adviser (CEA) Krishnamurthy Subramanian on Thursday virtually ruled out a major stimulus package for the economy, saying “profit is private, losses are public” is not good economics.

He said sunrise and sunset phases for industry are usual and expecting the government to support industry in sunset phases can be morally hazardous.

Speaking at the Hero MindMine Summit 2019, Subramanian said despite a bit of slowdown, India still is a bright spot in a world that is growing at mere 2-2.5 per cent, he said.

The panelists at the submit all agreed to the fact the term ‘recession’ is being taken quite loosely these days, as the situation globally is still not out of control. They suggested that any talks of stimulus for the domestic economy must be undertaken after considering its fiscal implications.

Subramanian said that both excessive pessimism or irrational optimism are equally bad and that one needs to be careful of anecdotes, aggregates and averages.

“Profit is private, losses are public... that can't be good economics,” he said.

Subramanian said if auto sector is going through disruption, it must not necessarily be a symptomatic of the economy.

“These are the principles the government will follow when one talks about stimulating the economy."

Former finance and economic affairs secretary Subhash Chandra Garg said there is no recession globally.

“This is year’s global growth will actually be higher than the average of past 3-4 years. We might be overblowing the slowdown,” Garg, who is now Power Secretary, said.

Garg noted that the first quarter of last financial year was the best in terms of economic growth, corporate profit and even in tax collections. That, in addition to plus election-induced slowdown took a toll on this year’s June quarter numbers.

“July-September quarter is usually the quarter when the talk of slowdown is the most pronounced, and we are seeing the same thing this year too,” Garg said. The Power Secretary warned that any stimulus can lead to additional government borrowing, which will stall the transmission of RBI rate cuts.