Speaking at Indian Expressâ€™s Express Adda with Esther Duflo, Abhijit Banerjee said that the critical problem in the economy currently is demand, which we should definitely stimulate.
If you look at every macro statistic other than GDP, this looks like 1991. Exports are shrinking, imports are shrinking, investments are not happening. It looks like 1991. Thatâ€™s the year when GDP shrunk. So, we donâ€™t look like an economy that is growing fast but nothing else is happening that looks like an economy is growing fast,â€ť he said.
When questioned what he would tell his peer from Jawaharlal Nehru University, Union Finance Minister Nirmala Sitharaman, he said that corporate taxes should not have been cut.
â€śAt the risk of being censured by my macroeconomist friends, I would say right now forget about the budget deficit and the deficit target. In any case - we have forgotten about it. We have a fictitious kind of accounting system in which we always meet our targets but, I think we can forget about it and forget about the inflation targeting as well because that was, I think, the origin of the mistake. Let it rip [the economy] a bit. I think we are really extremely close to the point where we could be tipping into a major recession. I do think we want to be open-handed right now,â€ť he added.
India's GDP growth has been forecasted to dip to an 11-year low of 5% in the current fiscal, mainly due to poor showing by the manufacturing and construction sectors, government data showed this week. As per the advance estimates for 2019-20 by the National Statistical Office, the growth in real GDP during 2019-20 is estimated at 5% as compared to 6.8% in 2018-19.
A World Bank report also said that India's growth rate is projected to decelerate to 5% in 2019-20 amid enduring financial sector issues, and that the country's GDP was likely to recover to 5.8% in the following financial year.