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In a Macroeconomic Bind
Despite it being the government’s last full budget before the general elections in 2019, the finance minister, constrained by his self-imposed fiscal deficit targets, settled for rhetoric and promises that were not backed with allocations. This frozen macroeconomic policy has foreclosed all options to adopt proactive measures that could make a difference to those who need support. Yet, the financial interests he wants to impress also seem disappointed.
With 2018–19 being the last full fiscal for the Narendra Modi government, Union Budget 2018 was expected to incorporate a big push to woo an electorate that would vote in the parliamentary elections scheduled for 2019. In budgetary terms, a big push would imply action along two interrelated lines.
First, the government should loosen its purse strings and expand expenditures, to infuse an element of buoyancy into the economy, even if at the expense of some inflation. Though international oil prices are on the rise, the current level of inflation is not overly high. With substantial foreign exchange reserves in hand, imports to rein in excessive price increases in specific areas are also easily financed. So this was an option that was open.
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