Assocham: Ramp Up Public Spending To Compensate For Expected GDP Fall

With private consumption shrinking in the wake of the demonetisation-induced cash crunch, industry chamber Assocham today (4 December) urged the government to bolster expenditure in order to partly limit the impact on India's gross domestic product (GDP).

"With 86 per cent of the cash out of circulation and replenishment facing difficulties, the Private Final Consumption Expenditure (PFCE) in the third quarter is expected to see a sizeable reduction to the extent of at least 35 to 40 per cent and slightly lower in the fourth quarter," the Associated Chambers of Commerce and Industry of India said.

"In terms of expenditure, PFCE, popularly known as - India consumption story - accounts for close to 60 per cent of the country's Gross Domestic Product at current prices and 55 per cent at constant prices (base 2011-12)," it said pointing to the enormity of the figures involved in case of the GDP.

The maths of the Assocham estimates point to a contraction of 2.5 per cent of the GDP in the ongoing third quarter, which will become worse for the final quarter of the fiscal.

"We urge that as against Rs 5.15 lakh crore in the second quarter, government expenditure, at market prices, should be jacked up to Rs 7 lakh crore for each of the third and fourth quarter for the sake of growth," Assocham Secretary General D S Rawat told IANS.

"Government expenditure itself accounts for a good part of the GDP to the extent of 14 per cent," the business chamber said.

With inputs from IANS