‘The question is how Subbarao judges fiscal policy next year’

.....Most people think if you really want the monetary policy to become loose, the fiscal policy must become tight. So the real question is what will the governor judge about fiscal policy next year. They won’t know that until the Budget is presented because that is when the government will give its indication. Normally what people say is if your fiscal deficit is too high —and we are saying it is too high — then the monetary authorities would typically say you should bring the fiscal deficit down credibly before we do some relaxing. Most people would actually say you anticipate rather than wait until it is actually reduced. That is the judgement the RBI has to make........

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