Problem of plenty

India needs a prudent policy on rising forex reserves

The Covid-19 pandemic has made macroeconomic management significantly more difficult. Despite a somewhat improved outlook, India is likely to end the current financial year with a near double-digit decline in output. Although the economy is expected to recover in the next fiscal year, going back to a higher growth trajectory will remain a challenge. India’s fiscal position is under stress and public debt is likely to expand to about 90 per cent of gross domestic product in the current year. Inflation has been running above the Reserve Bank of India’s (RBI’s) tolerance band for months and is not allowing the