Hold the line on the fisc4 min read . Updated: 14 Jan 2018, 11:56 PM IST
Modi has the resolve to hold the line on the fiscal deficit, and that he and his political advisers reckon that the electorate will give him credit for doing the right thing
It’s about that time in the life of a government: the economy appears to be losing its sheen and elections are fast approaching. The first law of political economy, which the politicians understand better than the economists, is to spend your way out of trouble. In more technical terms, the danger is that of the political business cycle—the use of (very frequently) fiscal, monetary, and (less frequently) regulatory policy to attempt to pep up the economy in advance of an election. It may make political sense, but, unfortunately, it only adds a further layer of volatility to the fundamentals of the economic business cycle.
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