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  • In the run-up to the budget, there was enormous pressure on the finance minister to launch a fiscal stimulus so as to pump-prime the economy
  • There is already considerable stimulus in the system.
  • The finance minister took a step towards transparency by admitting to off-balance sheet borrowings of 0.8 per cent of GDP for both the current and next fiscal year — acknowledging that the fiscal deficit would actually be higher at 4.6 per cent and 4.3 per cent of GDP respectively
  • Fiscal pressures will undermine the Reserve Bank of India’s struggle to revive investment by bringing down long-term interest rates
  •  It could result in a sovereign ratings downgrade and jeopardise efforts to attract foreign capital.
  • Can also stoke inflationary pressures
  • As much as the headline fiscal deficit numbers are a cause for concern, the underlying quality of fiscal consolidation is a bigger concern
  • Revenue deficit is actually going up
  • More than two-thirds of what the government is borrowing is going to finance current expenditures like salaries, pensions, interest payments and subsidies
December 2023