The government may not be able to achieve the envisaged infrastructure boost given the impact of the pandemic on the corporate sector, Ahluwalia said during a virtual conference on Friday.
“The idea that in the middle of a pandemic, with the corporate sector deeply scarred, huge debt being incurred, that you’re going to be able to do it (finance infrastructure through PPP), is to my mind not very credible,” Ahluwalia said during the conference hosted by the Centre for Social and Economic Progress.
The government had pinned its hopes of boosting growth in the current fiscal by focusing on the infrastructure sector in the Union Budget 2021-22.
Further, India’s growth for the current fiscal could be overestimated if divergent trends in the formal and informal sector of the economy have not been taken into account, according to Ahluwalia.
While a lot of the growth that gets recorded in the gross domestic product comes from the formal sector, corporate revenue and profits have grown due to cost cutting measures.
This included cutting down on contractual labour which implied that income growth has reduced and in turn had knock on effects for the informal economy, Ahluwalia said.
“The current method of measuring GDP is to assume that growth in the informal sector will be what it is in the formal sector…but if we are not reflecting the fact that the informal sector may not be growing that rapidly, we may be overestimating the growth of GDP,” Ahluwalia said.
“We do see that mobility within India has declined, and it has already had an impact on consumer confidence,” said Schipke, who also spoke at the conference.