The government has to prioritise growth over fiscal prudence, chief economic advisor Krishnamurthy V. Subramanian said on Wednesday at an IIM Calcutta event. “In this delicate balance between fiscal prudence and providing a spurt for growth, we need to lean on growth.”

The economic survey presented before the Union budget on February 1 had proposed a relaxation in the fiscal deficit target to boost demand which is crucial to the revival of the economy. The budget subsequently estimated a fiscal deficit of 3.8 per cent of GDP (gross domestic product) for 2019-20 against 3.3 per cent set earlier. The projection for the next fiscal has been set at 3.5 per cent.

Subramanian said the government had judiciously used an escape clause set in FRBM (Fiscal Responsibility and Budget Management) Act to boost demand.

Corona opportunity

The CEA said India may look at opportunities to boost its global trade amid concerns over the dreaded corona virus affecting trade from China.

India is one of China’s leading trade partners in Asia and has a huge trade deficit with that country. “Very hard to say what will manifest. However, the outbreak of the coronavirus provides a good opportunity for India to follow an export-driven model,” Subramanian said. The number of fatalities from China’s new epidemic jumped to 1,110 nationwide on Wednesday after hard-hit Hubei province reported 94 new deaths.

“Episodes like these have lot of uncertainties. What economists call unknown unknowns. If we go by the experience of SARS, India was not impacted that much, So it could be a good opportunity for India,” he said. The economic survey has highlighted how India can follow a model to assemble goods in the country for export.

Subramanian also spoke in favour of creating more opportunities for the private sector, which is expected to play a crucial role in supporting a 6-6.5 per cent rate of growth for the economy in 2020-21.

“Giving more space to the private sector enables more efficiencies,” he said.