The news that US lawmakers had struck a deal which has, for now, helped it avoid the fiscal cliff of higher taxes and lower state spending turned out to be the tonic the stock markets were looking for, with the Nifty breaching the psychologically important 6,000 level in intra-day trading.
Undoubtedly, the reaction is borne of relief that the world’s largest economy is back from the precipice. In another way, the markets are sending out an unambiguous signal on fiscal prudence; a signal also relevant for India.
While the change in leadership in North Block has no doubt signalled a new energy and purpose towards fiscal consolidation, there is only so much a finance minister can do. Without political air cover, proposals will remain mere promises. But business as usual is no longer an option. Like in the US, the time has come for India to bite the bullet. Is the polity ready?