File photo: Xinhua

Year 2020 will be crucial for the Indian economy, which urgently needs a shot in the arm before the stalling growth becomes irreversible. But it may be a tough choice for the government given its limited fiscal space.

The Reserve Bank of India (RBI) recently once again downgraded its growth forecast to 5 percent from 6.1 percent for the current financial year. The revision was made against the backdrop of the GDP growth rate falling to 4.5 percent in the third quarter, marking the first time in six years that the growth rate was below the psychologically important 5 percent mark.

Not so long ago, India was said to be the new engine of global growth, but now every major indicator points to a grim outlook. It has become more challenging than ever for the South Asian economy to accomplish the target of becoming a $5 trillion economy by 2025.

There is no denying that the Indian government has rolled out various measures to lift the economy. For instance, the RBI already reduced benchmark interest rates for a fifth time this year to the lowest in nine years, and the government has taken measures like an infrastructure boost, corporate tax cuts, liberalizing foreign direct investment, and so on.

While the effects of these measures on the economy remain to be seen in the coming quarters, the Indian government would be better to prepare a stronger stimulus package in case the economic growth continues to slide next year. Because once the economic stall becomes the trend, then it will lead to a series of unpredictable chain reactions, and even a vicious cycle of economic movements and market activities.

Some say that India needs reforms to restore growth momentum, but most reforms that are designed to put India on a sustainable growth path take a long time and the country doesn't have so much time to wait. What India really needs to do is take measures to stabilize the economy in the short term so that it could have a relatively easy environment for those reforms.

Nevertheless, it should be acknowledged that there is limited room for the country to take any fiscal stimulus measures given its heavy debt burden. In this sense, how to bring the Indian economy out of the doldrums without adding too much to the fiscal burden will be a major test for the government next year.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn