Economic Survey primer

On Fiscal consolidation

Advanced countries have embraced fiscal activism, giving a greater role to counter-cyclical policies and attaching less weight to curbing the debt stock. But, India’s experience has taught opposite lessons

India’s fiscal stance has an in-built bias toward higher deficits, because spending rises pro-cyclically during growth surges, while revenue and spending are deployed counter-cyclically during slumps

It (India’s experience) has reaffirmed the need for rules to contain activism, so as to rein in excessive spending during booms and inordinate deficits during downturns, a pattern that contributed to both recent episodes of severe macroeconomic instability (1991 and 2013)

FarmersImpact of demonetisation

An uncertainty shock because economic agents Budget 2017 India face imponderables related to the impact and duration of the liquidity shock as well as further policy responses (causing consumers to defer or reduce discretionary consumption and firms to reconsider investment plans)

Agricultural sowing, passenger car sales, and overall excise taxes bear little imprint of demonetisation; sales of two-wheelers show a marked decline after demonetisation; credit numbers were already looking weak before demonetisation, and those pre-existing trends were further reinforced after November 8

If nominal GDP growth declines, corporate and indirect tax revenues of the Centre could decline but so far there is no clear evidence

On Universal Basic Income

The Mahatma as the embodiment of universal moral conscience would have seen the possibility of UBI in achieving the outcomes he so deeply cared about and fought for all his life

As a fiscal conservative he (Mahatma) would permit UBI only if convinced that macro-economic stability would not be jeopardised Recognising the difficulty of exit, the Mahatma, as an astute political observer would have anxieties about UBI as being just another add-on government programme. But on balance he may have given the go-ahead to UBI

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Economic Survey primer

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