Fiscal vs monetary policy, under uncertainty

Heightened uncertainty from a second wave is likely to increase the relative efficacy of fiscal vis-a-vis monetary policy


Sajjid Chinoy
The first of this two-part series analysed the potential economic impact of the second wave, noting that while the growth hit in the current quarter will be lower than last year at this time, the behavioural scars engendered by a vicious second wave could keep uncertainty elevated in the next quarter at least and, therefore, drive a more gradual recovery. Unsurpr­isingly, several GDP forecasts have been marked down towards 9 per cent for this fiscal year, which would leave the level of output about 8 per cent below India’s pre-pandemic path. How, then, should policy respond?

With a health crisis
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of or the Business Standard newspaper

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First Published: May 24 2021 | 9:34 PM IST

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