Uncover the potential of active and passive investing on 6th October at 4pm. Register Now!
Last Updated : Aug 08, 2020 10:59 PM IST | Source: PTI

Arvind Panagariya pitches for demand side stimulus as business activities see uptick

Panagariya opined that a large fiscal stimulus in India would not have produced result as it has not given results in the US or Europe.

File image
File image

Former Niti Aayog Vice-Chairman Arvind Panagariya stated on August 8 that the nation is going to possibly require 'a little bit of stimulus' on the demand side as the country's economic activity begins to expand.

The renowned economist also said that imposing import licensing will be a violation of WTO norms that India has signed.

Speaking at a CII's India@75 virtual event, Panagariya said, "Down the road, as the economy is continuing to open up, if we see that inventories are accumulating rapidly then that would be a clear sign that there is a demand deficiency problem.


Panagariya pointed out that even with the current level of intervention, India is staring at debt-to-GDP ratio rising from 72 percent to about 85 percent at least by the end of the current year. "And we are going to need perhaps a little bit of stimulus on the demand side as the economy begins to pick up," the eminent economist said.

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more

The government in May announced nearly Rs 21 lakh crore stimulus package to help the nation tide over the economic crisis induced by the coronavirus and subsequent lockdowns.

Panagariya, a professor of economics at Columbia University, said the country's economy was in stress even before COVID-19 hit it.

India's economy grew at 4.2 percent in 2019-20.

He opined that a large fiscal stimulus in India would not have produced result as it has not given results in the US or Europe.

"Large stimulus could help if the supply curve is positively sloped," he argued.

Talking about the government's 'Aatmanirbhar' programme, Panagariya said Aatmanirbharata (self-reliance) does not require that you got to produce everything that you consume.

"Import substitution is not a good idea. What worried me actually, is turn in the policies that has happened three years ago and trend has not reversed itself," he said.

Panagariya noted that he does not think that the talk of 'Aatmanirbharata' accelerated the process of import substitution policies.

"I don't think since the talk of Aatmanirbharata, this has accelerated...I have heard some talk about import licensing, somebody has told me that import licensing has come back, I have not seen any reports of actual import licences having been imposed," he said.

"Of course that (import licensing) will be complete violation of WTO norms agreement that we have ourselves signed," he added.

Panagariya also said that he was more worried about the general trend of rising import tariffs in India. He also noted that India is facing a strategic challenge from China because India's economy is much smaller than China's.

(With inputs from PTI)
First Published on Aug 8, 2020 09:26 pm