GDP decline: Economy needs tariff cuts, weaker rupee not govt spending boost, says Arvind Panagariya

Amid growing concerns over sluggish economic growth prospects in the next few quarters, several media reports last week indicated that the government may soon announce fiscal stimulus package to revive the sagging economy. In fact, finance minister Arun Jaitley last Wednesday had said the government is considering additional measures to bolster the economy without giving details on the likely steps. However, not all of them agree that the government should undertake increased spending measures to give a boost to the struggling economy. [caption id=“attachment_3762759” align=“alignleft” width=“380”]  Niti Aayog’s former vice-chairman Arvind Panagariya. PTI[/caption] Arvind Panagariya, who held the position of vice-chairman at Niti Aayog till recently, has in fact argued in an article in The Times of India that the government should resist the temptation to go on a spending spree to boost economy. His comments comes in view of falling economic growth after the April-June GDP growth slipped to a three-year low of 5.7 percent. According to Panagariya, all the work done towards fiscal consolidation in last three years cannot be sacrificed by resorting to increased government spending, unless it merits such action, the report said. “The immediate feasible actions in this area lie in the domain of RBI. The rupee has seen a massive real appreciation in recent years and this needs to be reversed at least partially . Possible instruments include accelerated accumulation of reserves; no further relaxation of the ceiling on foreign investment in debt, which has heavily dominated portfolio inflows recently; and cutting the interest rate,” he had said in the article. In order to revive economy, Panagariya has said the government should lower tariffs and create coastal employment zones, which will boost exports and create gainful employment opportunities.