Govt bailouts a moral hazard, says CEA Krishnamurthy Subramanian

Calls for a fiscal boost from the government for sectors like automobiles have been growing in the past few weeks after the budget from Nirmala Sitharaman failed to provide support

Government intervention in the private sector creates a moral hazard, India’s chief economic adviser warned, a statement that could temper expectations of a stimulus for cash-strapped Indian businesses.

Speaking in New Delhi on Thursday, Krishnamurthy Subramanian said India has been a market economy since 1991, when it opened up to foreign competition. Sectors in market economies run through the spectrum of a sunrise-to-sunset phase, after which many businesses tend to fade away, he said.

“I think we expect the government to use taxpayers money to intervene every time there is a sunset phase,” Subramanian said. “You introduce possible moral hazard from too-big-to-fail