Billionaire banker and IL&FS chairman Uday Kotak, who is also the Managing Director of Kotak Mahindra Bank, has shared his views to revive the economy and suggested that the central and state governments need to borrow more to recover from the losses of Covid-pinched economy, but they need to understand and consider their limits.
“The size of our combined fiscal deficit of states and centre is a challenge. It was already high before the pandemic and now it will only worsen,” says Uday Kotak, president of the Confederation of Indian Industry.
“My assumption is that our combined fiscal deficit is at least 12-13% right now. Based on the need for further stimulus, I think the ‘Laxman Rekha’ for fiscal deficit is around 15%. We need to tread carefully while crossing that,” he said.
The government was highly expected to hike the market borrowing beyond the budgeted Rs 12 lakh crore to boost the economy that shrinked 23.9% in the April-June quarter. The government still chose to stick with its pre-decided borrowing target stating that it has already factored in the need for a fiscal stimulus.
“We need to keep everything in mind, that whatever money we are borrowing to spend, we’re borrowing from the future generation.” said Kotak.
He recommends that the additional borrowing should be channelized to aid the weakest section of the society and uplift them. “This extra borrowing should be used as a stimulus to create demand at the bottom of the pyramid. The demand has to come from the bottom,” he added.
He also said that the industry is optimistic that the government will extend some support for a festive push in the upcoming months.