DNA Money Edit: Will Eco Advisory Council clear stimulus package?

The newly-constituted Economic Advisory Council, chaired by Niti Aayog's Bibek Debroy, has a big task ahead. The announcement of floating the council, having renowned economists such as Surjit Bhalla, Rathin Roy and Ashima Goyal on board, came close on the heels of the government's decision to go for a stimulus package to push the economic growth. A fiscal stimulus definitely has a positive effect on the economy that has suddenly stuck at the lower end of the downward curve, but the council may have to look at a slew of issues that bother the growth today.

Its biggest challenge would be to advise the government in the election year as the country also heads for general elections in next 18 months. While economists look for long-term solutions to fix problems that ail the economy, the government may be in a hurry for some quick remedies and count on the fiscal stimulus. Abandoning or diluting of the ongoing fiscal consolidation process may not be a preferred route for economists.

On the flip side, the unexpected barrage of goods and services tax (GST) claims has surprised the government while the full impact of its implementation remains unclear. If the GST tax credit claims escalate, it may hit the government exchequer drastically.

Another concern is over the moves of the US Federal Reserve. It has already signaled the intention to unwind its massive bond-buying programme, and India may have to live with a large-scale outflow of money. What is heartening is that the country has built a sufficient $400-billion forex reserves to face any such eventuality.