Reality Check India

More on the budget

Posted in Uncategorized by realitycheck on March 4, 2008

My earlier posts on the budget were rather lightweight. That is largely because I do not possess adequate knowledge of big picture economics (macro?).  Even though “inadequate knowledge” never stopped me before, macro-economics is harder to pull off.  When I read such articles, I can however go “that sounds about right”, or “hey that doesnt hold together”. 

I was hoping to read about the possible ways to finance the Rs 60K Crore loan waiver and what each of them would mean. Even the Indian Economy blog has not covered it yet, although they do have an important post by Nitin wondering about the nature of these loans. The mainstream media has all but forgotten about the waiver.

Barbarindian has an excellent post which lays out the possible ways to finance the waiver. It also raises several points for the first time such as the impact of this waiver on farm insurance schemes.  All this wrapped in his usual take no prisoners style.

If this is the case, the FM perhaps wants to induce inflation, bring the Rupee up to 45 to the dollar, aggressively import food grains and hope for a rebound. Alternately the FM is betting on the fact that inflation is a lagging indicator. By the time the waiver is worked in and all the factors set in, it will be late in the year.

In the latter case we will likely see the general elections happen later this year.

Check out the full article now.

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