Keep fiscal options open

25 MAY,2020 | MEDC


 

The finance minister has said that more announcements may yet be coming, depending on how the situation evolves. The RBI has done its bit and now the ball is in the court of fiscal policy. No doubt, government finances are strained and tax revenues cannot hold up. But this is an exceptional situation and so it calls for exceptional measures to resolve it. If the fiscal deficit rises further, it could spark the risk of inflation. But this is a risk that must be taken, as we have to use all available fiscal firepower to aim money where it would have the maximum and most immediate effect. Direct aid for those starved of money could be an option. And this includes not just individuals, but also companies of all sizes, as too many business closures would damage the economy’s productive capacity, thus perpetuating the vicious cycle. Time is of the essence, and every possible policy option deserves consideration.

*Photo Credit: Google

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