India is now grappling with a balance sheet recession that has perhaps put the economy close to deflation. This stunning insight lies at the heart of the excellent second volume of the Economic Survey released by the finance ministry on Friday. The Economic Survey makes three points. The standard response to a balance sheet resolution is quick resolution of excess debt plus a fiscal stimulus to domestic demand. Lower interest rates rarely work since a private sector deep in debt prefers to hold on to the savings from lower interest rates rather than spend on new projects or consumer goods.

Source: Mint August 11, 2017 21:33 UTC