ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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A Monetised Deficit for Sustaining Growth amidst the Meltdown

If India is to cope with the fallout of the global financial meltdown, it needs to think of unusual policies and strategies, including those it had earlier turned its back on. The immediate challenge is to arrest the loss of confidence of private investment and the attendant tightening of liquidity. The only way this can be achieved is by sustaining growth - through a major expansion of public investment in infrastructure and social programmes, financed by a monetised budget deficit. Such a deficit will infuse liquidity and well-chosen public outlays will revive growth. Inflation is a risk in such a strategy, but it is now a question of playing at the margin - the risk we are willing to take on inflation in order to raise domestic expenditure that would lead to faster growth.

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