How the bank recap will play out

Govt's plan will have little impact on its target to shrink the shortfall to 3.2% GDP in the year through March 2018

Prime Minister Narendra Modi’s administration will inject an unprecedented Rs 2.11 lakh crore into struggling state-run banks over the next two years, his biggest attempt to revive growth.

Morgan Stanley is calling this India’s TARP — a reference to the US Troubled Asset Relief Program implemented in the throes of the financial crisis — and Indian stock markets welcomed the decision but bond investors were more circumspect.

Here’s how it may roll out:

Impact on fiscal deficit

The government’s plan will have little impact on its target to shrink the shortfall to 3.2 per cent of GDP in the year through March 2018 because