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Mihir Sharma

No, India Doesn’t Need a Bigger Stimulus

For now, it’s more important for the government to keep things stable until it’s clear how best to intervene. 

Sitharaman and Modi started with the right diagnosis. 

Sitharaman and Modi started with the right diagnosis. 

Photographer: T. Narayan/Bloomberg

When Prime Minister Narendra Modi recently announced a stimulus package for India, he said it was worth Rs. 20 trillion — $265 billion, equivalent to about 10% of the country’s GDP. This seemed to fit in with the amounts being spent by some rich OECD economies to deal with the fallout from the Covid-19 pandemic. Equity markets exulted.

In Modi’s India, though, it’s usually wise to wait for the details. Now that they’re out, the markets — and many economists — are disappointed. Actual spending is a fraction of what Modi promised, they argue — perhaps as little as 1% of GDP. Once equity traders added up the package’s components, the markets duly sank back into gloom.