ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Monetary Policy Hampered by Fiscal Inaction

The relatively credible programme of fiscal correction presented in the 1999-2000 budget, combined with low inflation and reduced credit offtake, has emboldened the Reserve Bank to try to bring down interest rates. However, the attempt is unlikely to revive industry in the absence of a sizeable increase in public expenditure and rapid expansion of bank credit.

Misplaced Focus on Fiscal Deficit

One of the disconcerting aspects of fiscal management since the beginning of the stabilisation programme in 1991-92 has been the failure to focus on correcting the growing revenue deficit of the central government. The focus instead has been on reducing gross fiscal deficit without taking into account the structure of financing of this deficit.

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