India will stick to prudence amid fiscal crisis

Significance

Meanwhile, the government is under pressure to raise expenditure to help ease the pandemic-related economic crisis. Delhi is reluctant to borrow more, as an increase in public debt could hurt its sovereign rating.

Impacts

• India will struggle to avoid a heavy GDP contraction this fiscal year.
• In the medium term, some states may try to reclaim the powers of taxation they surrendered through the Goods and Services Tax.
• The government will count on market liberalisation to spur post-pandemic economic recovery.