The long-term costs of persistent financial repression have not always been considered by policymakers
India’s growth rate has slowed from over 9% to a little over 7% in recent years. So, many economists are inclined towards increasing public spending and missing the fiscal targets previously set (the expansionary view). However, Reserve Bank of India (RBI) governor Raghuram Rajan has come out forcefully against relaxing fiscal targets (the prudential view). I focus on the prudential view and go beyond what Rajan said.