Beyond economic band-aid | The Indian Express

Beyond economic band-aid | The Indian Express

Written by Sajjid Z. Chinoy |Updated: August 31, 2019 11:38:28 am

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

Beyond economic band-aid

Stimulative impact of RBI transfer is lower than presumed. Sustained reforms remain key

Even as there has been a slew of comments around the RBI’s surplus-capital transfer to the government, confusion reigns on its macroeconomic implications.

Even as there has been a slew of comments around the RBI’s surplus-capital transfer to the government, confusion reigns on its macroeconomic implications. There’s a perception that a fresh stimulus of the amount transferred (Rs 1.76 lakh crore) is now available. Consequently, market participants are queuing up to suggest where this fresh spending should be deployed. Indeed, a stimulus of this quantum (almost 1 per cent of GDP) invested in public infrastructure projects — that have large multiplier effects — should be enough to arrest the current slowdown, right?