Patel warned of upside risks to inflation due to fiscal slippages

Former Reserve Bank of India Governor Urjit Patel as well as Deputy Governor Viral Acharya have cautioned the government on the upside risks to inflation due to fiscal slippages, minutes of the December Monetary Policy Committee (MPC) meeting showed. Admitting the pace of inflation slowed in October, Dr. Patel highlighted several upside risks to inflation, including the risk of fiscal slippages at the Centre and/or State levels. “With the government [Centre plus States] fiscal deficit budgeted at about 6% of the GDP in 2018-19, the extant national fiscal stance continues to be more like a “shock amplifier” rather than a “shock absorber” for our macro economy,” Dr. Patel said. During the policy meet, the central bank kept interest rates unchanged while maintaining the ‘calibrated tightening’ stance. All things considered, the time is apposite to strengthen domestic macroeconomic fundamentals; fiscal discipline is critical to create space for and crowd in private investment activity, he said. Dr. Acharya, who is in charge of monetary policy, also said fiscal slippage was within the realm of reasonable possibility. Falling crude oil prices gave an opportunity for fiscal consolidation, he added. While Dr. Acharya had said that since inflation had come down in a short period, it is important to ‘wait and watch.’ However, Dr. Patel indicated opening up of space for rate cuts.

Source : https://www.thehindu.com/todays-paper/tp-business/patel-warned-of-upside-risks-to-inflation-due-to-fiscal-slippages/article25785924.ece

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