Policy uncertainty

Businesses avoid environment of policy instability

Macroeconomic stability and policy certainty are important determinants of investment as businesses are not inclined to invest in an environment of economic and policy instability. Over the last few years, India has done well to reduce uncertainty, but some decisions, particularly in the latest Budget, can undermine the benefit. 

At the macro level, for instance, the adoption of the flexible inflation-targeting framework has helped anchor inflationary expectations. This is important because it will not only help strengthen macroeconomic stability but also enable businesses to make better longer-term forecasts. Price stability, among other things, can be expected to bring down the cost