Over the past three decades, the loosening of the fiscal purse strings (a higher fiscal deficit) has been associated with higher inflation rather than higher growth, the data suggests. India’s fiscal deficit began rising since the mid-1980s, driving growth initially, and then fanning the fires of inflation leading up to the 1991 economic crisis. This helped set market expectations, and laid the conditions for the boom that followed in the 2003-08 period. The 2008 financial crash led to a loosening of purse strings once again. Will 5 July signal a shift in India’s fiscal management once again?

Source: Mint July 02, 2019 07:07 UTC