(Bloomberg) --
India's government needs to stop worrying about budget deficit targets and use any cash windfall to support its economy as the coronavirus hurts global growth, according to the State Bank of India.
The government must use gains from higher tax on gasoline and diesel to fund income support programs, rather than using the money to bridge a budget shortfall, said Soumya Kanti Ghosh, the chief economic adviser for the nation's biggest bank. The Finance Ministry estimates the fiscal gap at 3.8% of gross domestic product in the current year and 3.5% in the year starting April 1.
“It will be completely foolhardy to stick to any mandated fiscal rules in times of current crisis,” Ghosh wrote in a report Thursday. The money must be used to support income of people working in the unorganized sector, which is facing the brunt of loss of jobs, he said.
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India, the world's third-biggest oil consumer, this month raised some excise and import taxes on gasoline and diesel as crude oil plunged and demand collapsed. Countries from the U.S. to Germany have pledged spending to fight the virus's economic fallout.
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