Senior fellow Arvind Subramanian writes an op-ed about the current challenges of India's monetary and fiscal policy.
From the article:
The possibility that India is one Ben Bernanke non-decision or one election freebie away from a serious external financing crisis cannot be ruled out. How is this government trying to head off such a crisis? How should it do so? A simple framework helps answer both questions.
This government has three objectives in descending order of priority: winning the next elections, averting a crisis, and preventing a sharp slowdown in growth. One could argue that, in the short run, it cares about the latter two only to the extent that they facilitate the attainment of the first objective. And, as a very illuminating JPMorgan document recently showed, averting the crisis requires India to attract about $25 billion in incremental portfolio inflows in the second half of this year to meet the country's external financing requirements. Failure to do so will push India close to the precipice.
Read it here.
