February 08, 2021

Budget 2021-22: A macroeconomic overview

Providing a macroeconomic overview of the Union Budget 2021-22, Niranjan Rajadhyaksha and Sharmadha Srinivasan contend that it is reasonably aimed at fiscal expansion but that it sets the stage for higher public debt ratios that will complicate the management of the economy.

 

Excerpts:

 

"The 2021 Economic Survey, released before the Budget, has made a strong case for a countercyclical fiscal policy1 to support aggregate demand. The government has delivered a demand stimulus in the Budget, the size of which is hard to fault given the nascent stage of economic recovery....

 

The government has budgeted a fiscal deficit of 6.8% of GDP in 2021-22. This is higher than consensus estimates, which has unsettled the bond markets. The fiscal deficit is expected to come down to 4.5% of GDP only in 2025-26. What this means is that India will have relatively loose fiscal policy for at least the next three years. The public debt-GDP ratio will be close to 90% this year."

 

You can read the full article here.

In : OP-EDS
x Close Window

Please verify your email address to access this content