Indian Fiscal Policy: A possible escape route
Coherent Identifier 20.500.12592/sqs690

Indian Fiscal Policy: A possible escape route

16 November 2023

Summary

Debt rises with the PD and the excess of the real interest rate (r) over the growth rate (g). [...] The UPAs first term was the best with the advantage of high growth, but a steep deterioration followed in the second term that included the GFC. [...] Debt reducing consolidation requires the RD and PD to fall more than the FD to raise growth; real interest rates to stay low; growth to rise and the volatility of both reduce. [...] India’s interest rate spreads with the US had widened during the pandemic as the Fed cut rates to zero but the MPC cut the repo only to its inflation target of 4% in mid-2020. [...] More has to be done to improve state capital expenditure (capex), the performance of public utilities, align overlapping state and central rights and responsibilities and delegation to the third tier, which is the point of delivery of public services.

Pages
16
Published in
India

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