Budget Expectations 2019: ‘Conventional Policy Will be Rewarding’

Professor Ajay Shah says the results of fiscal expansion, if it’s attempted, will be limited.

With the 2019 interim Budget, the BJP-led NDA sees an opportunity to present its vision for the next five years, if it returns to power.

According to Ajay Shah, professor at National Institute of Public Finance and Policy, the results of fiscal expansion, if it’s attempted, will be limited as they will not be achieved under the present administration.

“If fiscal expansion is attempted, results will not be obtained on the time horizons of the present administration. In other words, the gains from announcements of fiscal expansion will be limited.”

Ajay Shah, Professor

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‘Conventional Fiscal Policy Will Fetch Reward’

According to Shah, a conventional tone on fiscal policy might fetch a reward from international capital markets with ample financing.

“There is one reason, however, in favour of fiscal prudence. International capital markets will reward fiscal prudence by the Indian government with ample financing for the Indian current account deficit. Conditions on the rupee – in the period before the elections – will be better if the budget strikes a conservative tone on fiscal policy.”

Ajay Shah, Professor

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‘Efficient for Ruling Party to Strike Cautious Tone’

Weighing the timing of the Budget, which comes just a few months ahead of the general elections, Shah argues that it might be favourable for the Narendra Modi government to keep the tone ‘cautious.’

“Putting the cost and benefits together, it is efficient for the ruling party to strike a cautious tone in the last budget prior to elections in April/May, as has been the case with previous situations of this kind.”

Ajay Shah, Professor

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