India’s turn to a centrally planned economy began in the 1950s under PM Jawaharlal Nehru. But by 1991, the economy came to a grinding halt and faced a massive crisis.
With agencies sticking to their methodology in these times, an emerging economy rating and outlook appear to be worse regardless of whether its government is fiscally prudent or not.
The structure of Finance Minister Nirmala Sitharaman’s latest stimulus package indicates that the government had an eye on the fiscal deficit while making it.
RBI’s dollar reserves now stand at $608 billion, making India the fifth-largest reserve holding country in the world.
The May inflation figure may be somewhat inaccurate, with the rise appearing to be mainly due to higher global crude oil prices, commodity prices, and supply-side disruptions.
RBI data shows a sharp increase in households borrowing against gold. Other indicators also show higher borrowing. More credit is fine, but vaccination needs priority.
With a decline in new Covid cases and gradual unlocking, demand will mend in the next few months. Some weekly indicators are already signalling a pick-up in economic activity.
The RBI has held back Rs 20,000 crore as provisions. This could have helped the Modi government further at a time of tremendous fiscal pressure.
Current lockdowns, fear & uncertainty are driving down growth, but with second wave slowing, there’s hope that economic activity will improve in next quarter.
Indian economy is expected to do better than last year, but growth could be 11% or even lower, compared to the pre-2nd wave projections of 13% and above.