Former RBI Governor D Subbarao has expressed concerns over inequality in economic recovery between upper-income segments and lower-income households in the country.
“The economy contracted last year, for the first time in four decades, by as much as 7.3 percent. That was less deep than we had first feared but still deep enough to have caused distress to millions of families in the informal sector. There was an expectation of a sharp recovery this year but those expectations are now tempered by the impact of the second wave,” Subbarao told PTI.
He further added that that earlier expectations of a sharp economic recovery this year have been dashed by the new pandemic wave. The RBI too reduced its growth forecast for the current fiscal by one percentage point, from 10.5 percent to 9.5 percent earlier. India’s economy contracted by less-than-expected 7.3 percent in the fiscal ended March 2021. The World Bank projected India’s economy to grow at 8.3 percent in 2021-22.
“Poor households have run down their savings for medical expenses, and given the weak medical infrastructure in the villages, rural households are also much more uncertain and anxious about the impact of a possible third wave,” Subbarao said.
According to Subbarao, it may, unfortunately, become necessary to cut some desirable capital expenditure to meet the safety-net expenditures.”But such expenditure switching is a better option than borrowing more.”He also said that the government could of course consider some one-time tax measures such as a cess on corporate profits, capital gains, and sin taxes. On inflation, Subbarao pointed out that as per RBI’s policy statement, the current inflation reading of 5.1 percent is largely due to supply constraints.