Cause for a pause: RBI has to weigh inflation, fiscal deficit, bond yields

Risks of the govt overspending in 2018-19 are substantial; RBI will certainly have to change its own calculations about monetary policy

As the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) sits down to consider India’s monetary stance on Tuesday, it will have multiple stress points to consider. The recently presented Union Budget for 2018-19 saw the government compromise on its path of fiscal consolidation. The fiscal deficit for the ongoing financial year is estimated to come in at 3.5 per cent of gross domestic product, or GDP, a revision from the target in last year’s Budget of 3.2 per cent of GDP; and the fiscal deficit for next financial year is projected as being 3.3 per cent