What stimulus?: 

What stimulus?: 

Context:

• Ways to revive the Indian economy

Why there is an expectation of a fiscal stimulus amongst a large section of industry and economists?

• There is no sign of revival in corporate investment or exports
• There is a slow-down in private consumption due to jobless scenario

What should the government do?

• The government should put more money in highways, railways, irrigation and other public-funded infrastructure.
• It might increase the fiscal deficit, but that problem will take care of itself once growth returns and revenues, too, show corresponding buoyancy.
• There is a requirement of public sector managers E. Sreedharan, Verghese Kurien or Narla Tata Rao to take up projects

What is the solution?

• Boosting private consumption as against public investment is a more efficient way to revive the economy
• All fiscal stimuli were not successful in providing a necessary short-term demand boost to the economy. For example, the fiscal stimuli adopted by the government post the 2008-09 global financial meltdown

What is the incumbent government’s commitment?

• Unlike its predecessor, the current NDA government has shown greater commitment to fiscal and monetary prudence
• Low inflation and stable exchange rate regime has helped attract foreign capital flows both direct as well as portfolio investment in equities and bonds.
• These flows to finance its external current account payments deficit so the government need to take calculated risk while deviating from the path of macroeconomic stability