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India Needs to Lift Capital Spending to Revive Economy

A Columbia University professor, tipped to be an economic adviser to India’s new prime minister, says the country needs to lift capital spending to revive the economy even if that means a higher fiscal deficit.

“I am a fiscally conservative economist. At the same time we’ve got to worry about the revival of economic growth and that requires some increased spending on infrastructure,” Arvind Panagariya, a professor of economics at Columbia, told CNBC on Wednesday.

Panagariya said that increased capital expenditure would result in a higher fiscal deficit, but not by a significant degree.  “Last year’s fiscal deficit was 4.6 percent of GDP [gross domestic product] and it could be 4.5 percent this year which is relative to the estimate in the current budget of 4.1 percent, so it is not a large rise,” he said.

CNBC [1]

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