The budget’s dilemma | The Indian Express

The budget’s dilemma | The Indian Express

Written by Sajjid Z. Chinoy |Published: July 3, 2019 1:53:58 am

The writer is chief India economist, J.P. Morgan.

The budget’s dilemma

Fiscal tightening will accentuate growth slowdown, fiscal stimulus will hurt monetary transmission. There is a third way.

Difficult circumstances require bold and imaginative responses.(Illustration: Suvajit Dey)

This week’s Budget is likely to pose the first dilemma for the new administration. To understand why, however, one must fully appreciate the current macroeconomic context. Activity has been losing momentum for the last three quarters. To be sure, some transient pressures (pre-election uncertainty, one-off regulatory changes in the auto sector) will fade. But even controlling for this, underlying growth momentum is confronting several headwinds.