PremiumWith a burden placed at 90% of overall output and interest payments about to soak up ₹9.4 tn-plus next year, why not let the ‘money illusion’ take over the economy? It’s unfair on lenders, for a start; and especially on bank depositors, who have long been financially repressed by the low rates of easy money
| Listen to this article |
The assumption of 11.5% nominal growth in 2022-23 that served as the basis for Tuesday’s budget math is best interpreted as an indication of conservative accounting. Many economists expect that figure to turn out higher. As far as the Centre’s planning goes, however, it’s a good sign. Not just because an overshoot may allow some fiscal leeway, but more for what it says about our finance ministry’s apparent stance on inflation. Our budget-makers might have pegged next year’s real growth at 8%, with price levels rising 3.5%. Or perhaps some other split-up with lower growth. Either way, it suggests that our central bank would be enjoined to fulfil its inflation mandate.
This assumes significance in the context of an old policy temptation to sneakily inflate the national debt away in the wake of a crisis-caused overload. Inflation relieves debtors and punishes creditors. With a burden placed at 90% of overall output and interest payments about to soak up ₹9.4 trillion-plus next year, why not let the “money illusion" take over the economy? It’s unfair on lenders, for a start; and especially on bank depositors, who have long been financially repressed by the low rates of easy money.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!