NEW DELHI: With acting finance minister Pranab Mukherjee having chosen discretion as the better part of budgetary valour, the onus of keeping
the fires of the economy going has shifted to the country’s central bank, the RBI.
Propriety, it would appear, has tied Mr Mukherjee’s hands. He has followed the tradition of the interim budget merely being a vote on account, without tweaking taxation.
The global economic crisis and its impact on the Indian economy had given him an opportunity to depart from tradition and announce some measures in the budget that would give a fillip to the slowing economy. He has chosen not to.
This does not mean that the United Progressive Alliance government has decided that all it can do now, on the economic front, is to sit back and pray. It has two policy courses left, still.
One is to announce yet another instalment of the stimulus package outside the Budget, before the elections are notified. The other is to nudge the RBI to slash inter-est rates further and prod banks to lend.
Given Mr Mukherjee’s revealed preference for propriety, it seems increasingly unlikely that the government would announce another package of relief measures for distressed segments of industry. There could be some sectoral, piecemeal announcements.
But what is definite is more forceful action by the central bank. The RBI has held its hand, after slashing the repo rate to 5.5%.
It had decided, sensibly, to save its ammunition while the government was still busy taking fiscal measures. Now that fiscal measures seem to be more or less over, it is time for RBI governor Duvvuri Subbarao to take the baton and run with it.