27 APR,2020 | MEDC
The government has so far come out with a package worth Rs. 1.7 trillion for the most socioeconomically vulnerable sections affected by Covid-19. However, it isn’t yet clear as to how the government plans to support the broader economy and simultaneously manage its own finances. Managing public finances will be tricky in these circumstances. Fiscal options will need to be reconsidered within the confines of logic. While inflation may be muted in the short term due to the pandemic related demand shock, its behaviour could be unpredictable in a year’s time. Deficit financing is also not a solution to this problem. Luckily, the RBI has adequate forex reserves, so India’s external position is sound. The government needs to evaluate all available fiscal options carefully to enhance India’s economic resilience to black swan events, like this global virus outbreak.
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