{"id":34366,"date":"2018-10-30T17:13:34","date_gmt":"2018-10-30T11:43:34","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=34366"},"modified":"2018-10-30T17:13:34","modified_gmt":"2018-10-30T11:43:34","slug":"the-argument-against-a-fiscal-stimulus-package-for-the-indian-economy-live-mint-editorial","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-argument-against-a-fiscal-stimulus-package-for-the-indian-economy-live-mint-editorial\/","title":{"rendered":"The argument against a fiscal stimulus package for the Indian economy: (Live Mint, Editorial)"},"content":{"rendered":"<p><a href=\"http:\/\/www.livemint.com\/Politics\/lPjpxBbK9AfidjxM3L6UgO\/The-argument-against-a-fiscal-stimulus-package-for-the-India.html\">The argument against a fiscal stimulus package for the Indian economy<\/a>: (Live Mint, Editorial)<\/p>\n<p><strong>Context<\/strong><\/p>\n<p>It is believed by many economists that unless structural problems like bad loans are fixed, quick-fix solutions such as a fiscal stimulus package are not likely to raise growth rates<\/p>\n<p><strong>What is a &#8216;Stimulus Package&#8217;<\/strong><\/p>\n<ul>\n<li>A \u2018stimulus\u2019 is an attempt by policymakers to kick start a sluggish economy through a package of measures.<\/li>\n<li>A monetary stimulus will see <strong>the central bank expanding money supply or reducing the cost of money to spur consumer spending.<\/strong><\/li>\n<li>A fiscal stimulus e<strong>ntails the Government spending more from its own coffers or slashing tax rates <\/strong>to put more money in the hands of consumers.<\/li>\n<\/ul>\n<p><strong>Why is it important?<\/strong><\/p>\n<ul>\n<li>Stimulus acquired respectability after the US credit crisis of 2008 saw governments across the US, Europe, Japan and China rolling out large fiscal stimulus packages.<\/li>\n<li>India\u2019s fiscal stimulus package in 2008-09 included a blanket 4 percentage point cut in the excise duty rates<\/li>\n<\/ul>\n<p>o \u00a0\u00a0Rs 20,000 crore in plan spending by the Government,<\/p>\n<p>o \u00a0\u00a0\u00a0Rs 10,000 crore funding for infrastructure finance,<\/p>\n<p>o \u00a0\u00a0\u00a0Export subsidies<\/p>\n<p>o \u00a0\u00a0\u00a0Large government order for new buses to replace State public transport fleets.<\/p>\n<p><strong>Why the government must tread with caution?<\/strong><\/p>\n<ul>\n<li>Fiscal policy is a potent instrument that must be used to alleviate the unemployment crisis, but <strong>first, supply-side constraints need to be systematically united.<\/strong><\/li>\n<li><strong>The synchronized easing of fiscal and monetary policies in the wake of the financial crash of 2008 stoked the fires of inflation<\/strong>, and led to a widening of the twin deficits in the subsequent years.<\/li>\n<\/ul>\n<p><strong>What are the arguments against the stimulus package?<\/strong><\/p>\n<ul>\n<li>The biggest argument against a fiscal stimulus package comes from the example of borrowing spree unleashed by the central government in the late 1980s which culminated in the economic crisis of 1991<\/li>\n<li>The <strong>benefits of a fiscal stimulus are uncertain<\/strong> but the risks are clear<\/li>\n<li>India\u2019s <strong>consolidated deficit is <\/strong>significantly higher than most other emerging markets of the world, as the latest issue of the International Monetary Fund\u2019s Fiscal Monitor shows.<\/li>\n<li>It is worth noting that<strong> foreign portfolio inflows <\/strong>into India so far this year have been led by bond investors, who have pumped in a net of $22 billion in debt markets<\/li>\n<\/ul>\n<p><strong>What is the way ahead?<\/strong><\/p>\n<ul>\n<li>The key reason for this is the pile-up of bad debt that has made lenders wary of lending afresh, and the pipeline of stalled projects that has stymied the flow of fresh investments.<\/li>\n<li>Unless such structural problems are fixed, quick-fix solutions such as a fiscal stimulus package are unlikely to raise growth rates sustainably.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The argument against a fiscal stimulus package for the Indian economy: (Live Mint, Editorial) Context It is believed by many economists that unless structural problems like bad loans are fixed, quick-fix solutions such as a fiscal stimulus package are not likely to raise growth rates What is a &#8216;Stimulus Package&#8217; A \u2018stimulus\u2019 is an attempt&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/the-argument-against-a-fiscal-stimulus-package-for-the-indian-economy-live-mint-editorial\/\">Continue reading <span class=\"screen-reader-text\">The argument against a fiscal stimulus package for the Indian economy: (Live Mint, Editorial)<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-34366","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704576060},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34366","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=34366"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/34366\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=34366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=34366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=34366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}