Macro stability at risk

Govt should let the rupee depreciate, speed up GST refunds, maintain fiscal prudence, persevere with IBC and avoid policy mistakes

A few months ago, at the start of calendar 2018, India’s macroeconomy seemed in reasonable shape. The world economy was growing at its fastest in a decade, India’s economic growth was recovering quite well from the twin shocks of demonetisation and the transition to the Goods and Services Tax (GST), inflation was well below 5 per cent, fiscal trends were reasonable, and the balance of payments looked quite manageable with capital inflows well in excess of the current account deficit (CAD).

All that has changed in the last six months. Inexorably rising oil prices and an escalating threat of a