Niranjan Rajadhyaksha presents a framework for crafting India's fiscal response in his latest for the Mint. Excerpts:
"Here is a very simple framework to think about the challenge. There are four dominant questions. First, what is the gap between the rate at which the Indian economy can expand and the rate at which it is expanding right now? Second, what is the extent of the fiscal expansion that may be needed to bring economic growth close to potential? Third, to what extent will the Reserve Bank of India have to step in to ensure that the fiscal expansion does not create panic in the bond market at a time when government borrowings are absorbing almost all the financial savings of Indian households? Fourth, how large a fiscal expansion will Indian fiscal rules allow?"
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