In view of increasing costs of managing pandemic, the fiscal slippages are imminent. However, the resultant sovereign rating downgrades can act a deterrent for the government to announce much required big stimulus-cum-relief packages. Is monetisation of deficit is the way forward? In a recent interview, the chief economic adviser (CEA) to the finance ministry, Krishnamurthy Subramanian defended Indian government on its limited and inadequate covid-19 related fiscal stimulus package; citing concerns over ratings downgrades in case of high fiscal deficits. Earlier in April, Fitch Ratings had said that Indian government has less fiscal room to support the economy than many of its peers and the country’s credit profile would weaken if a wider fiscal deficit increases the debt-GDP ratio. This raises an important question that whether Indian government is in position to disburse much required big stimulus package that can tide over growing woes of economy amid fears of resultant downgrades...
A blog about challenges and opportunities in Indian economy