If the unprecedented monetary and fiscal stimulus works, output gaps will eventually close.
That is to say, fiscal retrenchment worth 1pc of GDP will cut output by half as much, or around 0.5pc over two years.
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For the last fiscal year ended on March 31, infrastructure output increased 2.6%, much slower than the 5.0% expansion the year before, underscoring the slowdown the local economy experienced over the past year.
In effect, the IMF split the difference last week, with its estimate that fiscal tightening had caused Britain's national output to be 2.5% smaller than it would have been (though the Treasury would claim that some of that effect was incorporated in the original forecast).
India is expected to become a net iron-ore importer in the fiscal year that began April 1 because of reduced output, but Thursday's order could mean a gradual turnaround in the situation.
His theory asserts that private sector decisions sometimes lead to unexpected downturns in the economic cycle and, therefore, the public sector, including monetary policy actions by the central bank and fiscal spending by the government are needed to stabilize output.
Since the start of the fiscal year in April, India's industrial output has contracted in six of the 10 months till January, reflecting the weak state of the economy, which has been battered by a mix of domestic problems including high inflation and wide fiscal and current account deficits.
But this part of the pie is shrinking too: fiscal-austerity measures took 0.7% off output over the past year.
Data show output in the first 11 months of the last fiscal year ended March 31 rose 0.9%.
Services-sector output is forecast to grow 6.6% this fiscal year compared with an 8.2% expansion last year.
Friday's GDP data showed growth in manufacturing output slowed to 1.0% in the last fiscal year from 2.7% the year before.
India's industrial output has contracted in six of the first 10 months of this fiscal year which began on April 1, reflecting the gloomy state of the economy.
Both the government and the European Commission have acknowledged the risks of depending on increased tax revenue, which is more growth sensitive, to meet fiscal targets and contingency spending cuts amounting to 0.5 per cent of national output have prepared in case of another tax shortfall.
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