Budget 2020: Nirmala Sitharaman uses fiscal space to spur the economy

Widest deviation from fiscal deficit seen under Modi government

The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) may have been given sufficient hints for its upcoming policy from Union Finance Minister Nirmala Sitharaman after she used the opportunity provided by the panel on fiscal consolidation to perk up the slowing economy.

Sitharaman used the escape clause given by the Fiscal Responsibility and Budget Management (FRBM) committee, headed by former bureaucrat N K Singh, to its maximum to take up counter-cyclical measures (see chart).

Experts believe that MPC may opt for status quo in the policy rate for the second time in a row after the government widened its fiscal