By our own estimates, fiscal deficit could go up to about 3.7% of GDP and on the back of this fear, we had the bond yields selling off 20 bps on Friday, says, Chief India Economist,. Excerpts from an interview with ETNOW.Yes, you have got it absolutely right. There are definitely some short-term positives out there but it will take time for us to have a proper growth impact. For example, in the short run, there could be a sentiment boost if companies cut prices for consumers during the festive season leading to some consumption demand.I am afraid at this point we are not going to see investment rise a lot which a lot of people are hoping for and the reason is that demand is still very weak. Rural and urban incomes are still very low. They are not demanding many things. Capacity utilisation is still very low. It is going to be a long time before capacity utilisation rises and then firms begin to think about new investment plans. You are right, there is definitely some sentient boost now which could be positive for growth but the real kick will come in the medium term.The fiscal cost is likely to be 0.7% of GDP annually that is what the government announced on Friday. Of this, two-thirds, which is 0.45% of GDP will accrue to the central government and the remaining to the state governments. This means a very high fiscal deficit. The government had budgeted 3.3% of GDP fiscal deficit for this year. By our own estimates, fiscal deficit could go up to about 3.7% of GDP and on the back of this fear, we had the bond yields selling off 20 bps on Friday. This has to be an area to watch out for because this is not just a one-year thing. Whatever happens this year could also continue next year because the corporate tax cuts are permanent in nature and also next year we would not be having the RBI excess dividend, that extra 0.3%. So, the pressure will continue.Also it will not just be the central government. It will also spill over into the state finances because they were also getting money out of the corporate tax receipts; one-third of the corporate tax receipts used to go to the states. So the fiscal situation is something to keep an eye out for.According to media reports, the finance minister said they would not be cutting expenditure which basically has two implications – one, that the fiscal deficit will be high, nearer 3.7%; two, they really ramp up on disinvestment receipts. Now the stage is set in some sense. Equity markets are up and so there could be a huge wave of disinvestment in the economy, which would be good for growth. It would also be good for fiscal finances. But let us wait and watch because we have had some false starts on the disinvestment front in the past.We are working with fiscal deficit at 3.7% of GDP for this year. Next year, will perhaps, it will remain quite elevated. We are also building in some increases in state fiscal deficits. They were budgeted at about 2.5%. They could be slightly higher. These are the kind of numbers we are going ahead with at this point.Yes, fair enough. That is a great point and especially because you have put on all your taps, you are doing a huge monetary policy stimulus. 110 bps rate cuts already been done. We are expecting 50 bps more. So, there’s a huge monetary easing and now you also have a really substantial and hefty fiscal easing.Perhaps one can argue the right kind of fiscal easing. Corporate tax rate cuts can also have a lot of medium-term impact. When you put on both the taps at some point, the impact on the rest of the economy must show up and that is why I also have growth numbers increasing from FY20 at 5.9% to 6.5% in FY21. So that is the reason we have growth increasing just the impact of all the policy stimulus that we are seeing out there. The reason we are still sub-7% is because you have to put India in the global context. At a time when global growth is slowing, global trade is very weak, I do not think India can really shine and go up to your 8% kind of growth which we were used to about a decade ago. We will have to be realistic about what India can achieve, given the global backdrop. I think we are going to see a recovery in the second half of this year and also next year.I am a big believer of government capex in a fiscally responsible way when we can stick to our fiscal deficit and still increase government capex. We almost always crowd in private sector capex which is our ultimate goal. So, I am a big supporter of that. The only way I think it can happen in a responsible, sustainable way is by doing asset recycling in which the government keeps selling a lot of the assets it owns in terms of airports, roads and so on and uses that money to build new airports, new roads.That is the cycle I am hoping it will kick off. In a way, it is very similar to disinvestment. I believe this whole disinvestment and asset recycling cycle can kick off now, especially if equity markets and sentiment are buoyant as they have been since Friday. Let us see how long it lasts. If it does, then a new cycle of asset recycling could arguably start.Well your question is very good and it sort of deserves a good answer. You know what we have seen in the whole globalisation period when China really soared we saw many cycles moving together, there was a very strong trade cycle, global capex cycle and global manufacturing cycle. Almost all countries took part, almost all countries gained growth across the world even in India was strong. This cycle as fallen off, has become sluggish now. This is the trade, capex and manufacturing cycle across the world -- it is in China, it is in the US, it is in the developed and developing countries.You cannot fight that wave of a global cycle turning. What you can do a little bit piecemeal, at home you can run some sort of expansionary fiscal and monetary policy like we are doing, like China is doing and under those global constraints you can try to increase your growth but it would not be like what it was when China was growing at 8-10%, it is not that world anymore so we have to remember that. But having said all of that, if you cut rates so drastically as we have done in India and you give a fiscal stimulus under those global constraints, I do believe growth will inch up a little bit and that is why I have growth picking up slightly in FY21.For the year as a whole, in FY20, we have GDP growing at 5.9%. The first quarter has been 5% and we do expect a recovery in the second, third and fourth quarters. I would be more inclined to say that the fourth quarter will be the best because second has not been very much better, third we will likely see some improvement and fourth will be the best.In that sense, I am expecting some higher growth in the second half of the year compared to the first of the year on the back of improved sentiments and also some monetary transmission. But having said all of that, let me be very clear that my growth numbers are below consensus, I am at sub 6%, at 5.9% even after seeing this corporate tax rate cuts last week for all the reasons that you mentioned that demand is weak, how far could a supply side measure go.