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.
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.