An expansionary consolidation

The Budget can generate an expansionary fiscal impulse even as it consolidates the headline deficit

At the best of times, budget-making has to carefully balance fiscal sustainability with the needs of the business cycle. In a post-Covid world, however, these trade-offs will get much more acute for emerging markets. They must simultaneously grapple with unwinding — often large — crisis-induced fiscal support while still staring at incomplete recoveries down the line.

In the case of India, the recovery is proceeding faster than previously envisioned because India has been able to successfully break the link between mobility and virus proliferation, and we expect this to be complemented by stronger government spending in the second half of the