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Economy

Economy needs the lunch to be served. It doesn’t have to be free.

A fiscal lifeline to the industry has to be conditional. There are tools that can ensure the exchequer gets good returns on the money invested to rescue companies. The TARP mechanism used by the US during the 2008 crisis is a classic example. For India, the returns from a private-sector stimulus can ease fiscal deficit by 5 bps.
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8 May 2020 7 Mins Read 4 comments
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Socialising private-sector losses is anything but simple, the history of the sovereign crises worldwide would tell you. The east Asian and the Latin American crisis clearly exemplify this. The Asian crisis had its roots in US commercial banks that had given loans to the private sector in these countries but never got repaid. The three countries– Thailand, Indonesia,
the exchequer to generate returns on investments. To be sure, the industry will continue to earn profits when the economic cycle reverses and profits will remain privatised. However, by enabling the government to earn some return on the taxpayer money, it will be a win-win for all. ( Research support by Rochelle Britto) ( Graphics by Sadhana Saxena)
Socialising private-sector losses is anything but simple, the history of the sovereign crises worldwide would tell you. The east Asian and the Latin American crisis clearly exemplify this. The Asian crisis had its roots in US commercial banks that had given loans to the private sector in these countries but never got repaid. The three countries– Thailand, Indonesia, the exchequer to generate returns on investments. To be sure, the industry will continue to earn profits when the economic cycle reverses and profits will remain privatised. However, by enabling the government to earn some return on the taxpayer money, it will be a win-win for all. ( Research support by Rochelle Britto) ( Graphics by Sadhana Saxena)

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