Earlier today is disparaged the "where will the government find the money" question. The pushback I got is that it does not really mean money is literally the constraint. Also, that it is a common way of saying it. I am going to push back against the pushback.
The "common" way of saying it tends to promote the widely held but erroneous idea--an idea that has led much misguided policy-- that government budgets face constraints similar to households and firms. No, they categorically do not. HHs and firms cannot print their way out.
There are other important differences as well. https://macromyths.blogspot.com/2017/12/government-deficits-financial-view.html
The bottom line is that government ultimately face two constraints: real resources that shows up as inflation and balance of payments (BOP).
Does India face either constraint now or in the foreseeable future? No. 1) Inflation has been low for a while and I just dont see the set of conditions that would lead to sustained high inflation. 2) FX reserves are near record levels--even during the crisis in March, there was
....no major flight. Rupee has depreciated largely in line with Asian peers. Nothing alarming. 3) External debt to reserves is low. 4) Current account will likely go into positive thanks to oil price plunge.
The only financially unsound thing would be to squeeze the economy in..
....the name of some misguided "fiscal soundness" that has no basis in any reasonable theory nor practice.
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