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

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New Macroeconomic Consensus Rules Budget 2014-15

A critique of the macroeconomic framework that underlies the fiscal consolidation approach of the Union Budget for 2014-15 .

With moderation in economic growth from the level of 9 per cent in 2010-11 to 4.5 per cent in 2012-13, there was general consensus that sustained high levels of fiscal deficit lead to various forms of macroeconomic imbalances and calls for immediate corrective fiscal policy response. Accordingly, as part of mid-year course correction, government successfully reduced fiscal deficit and laid down path for fiscal consolidation.

              (from the Preface of “Macroeconomic Framework Statement 2014-15”, emphasis added).

With contraction of government deficit there will be more room for private investment and capital inflows. This will also ease inflationary pressure providing comfort to RBI for easing monetary policy.

               (from “The Medium Term Fiscal Policy Statement”).

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