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Don’t cut direct stimulus fearing a debt overload. It can severely dent India’s economic recovery.

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Economy

Don’t cut direct stimulus fearing a debt overload. It can severely dent India’s economic recovery.

Contrary to the perception that higher stimulus will lead to an unsustainable debt burden, the reality might be just the opposite. By triggering growth, a debt-funded stimulus enables higher revenues for the government, reducing the size of borrowing programmes. The ideal strategy for the Modi government would be a direct and targeted stimulus funded by lower-yielding debt.
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2 Jun 2020 7 Mins Read 7 comments
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Prime Minister Narendra Modi promised a mammoth INR20 lakh crore stimulus — at 10% of the GDP — to resuscitate the economy. But the fine print has disappointed many economists, who felt the government had been conservative in shaping the package to avoid a debt overload. This approach could dent India’s prospects in the months ahead, making a ‘V-shaped’ economic
accrue to the fisc and helps sustain future debts by reducing the size of its borrowing programmes. The ideal strategy would be a direct and targeted stimulus funded by lower- yielding debt so that sustainability is not under threat. The trade-off between growth and debt expansion can thus be managed well. ( Graphics by Mohammad Arshad)
Prime Minister Narendra Modi promised a mammoth INR20 lakh crore stimulus — at 10% of the GDP — to resuscitate the economy. But the fine print has disappointed many economists, who felt the government had been conservative in shaping the package to avoid a debt overload. This approach could dent India’s prospects in the months ahead, making a ‘V-shaped’ economic accrue to the fisc and helps sustain future debts by reducing the size of its borrowing programmes. The ideal strategy would be a direct and targeted stimulus funded by lower- yielding debt so that sustainability is not under threat. The trade-off between growth and debt expansion can thus be managed well. ( Graphics by Mohammad Arshad)

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