FM targeted liquidity issues; sustained upturn in market will take time

The financial markets is expected to behave in a measured manner, given the cautious environment and weakening sentiments

The biggest concern for the Indian government in providing substantial fiscal stimulus seems to be the fear of a downgrade of sovereign rating to a junk category given our high debt-to-GDP and low tax-to GDP-ratios. On the other hand, not providing any significant or effective stimulus will do more harm than good amid the Covid-19 pandemic. If these issues are not addressed, India’s structural growth potential will be impacted. It is paramount for our ‘nominal’ GDP growth rate to accelerate quickly in the next couple of years in order to keep the debt/GDP ratio in check.

The government has thus