She promised vibrancy. Will he allow it?

The coronavirus pandemic was "the biggest disruption of the global economy since the Great Depression of the 1930s and World War II", wrote Sanjeev Sanyal. "Unlike other governments, Indian policy-makers judged that it was inefficient to use limited resources to attempt a grand stimulus during a lockdown." "Let it be clear that there is both monetary and fiscal space to do more when appropriate." Total lockdown was announced by Prime Minister Narendra Modi on 24 March and there was assembly election in only one state, Bihar, after that. In 2021, there are elections in 4 big states, Assam, Kerala, Tamil Nadu and West Bengal. Finance Minister Nirmala Sitharaman has promised that "the forthcoming budget will have the vibrancy required for revival of the economy". "Meanwhile, despite the severity of the economic shock, India's macro-economic conditions remain broadly stable. The rupee is stable, foreign exchange reserves and financial markets are at all-time highs, and the current account is in surplus (albeit reflecting demand compression)." "India's current macroeconomic situation is 'very uncertain' and the country's GDP could contract closer to 10 percent in the current fiscal, former chief statistician Pronab Sen said on Sunday." "I think there is too much optimism going around," he said. India's GDP shrank by 7.5% in the second quarter after shrinking by 23.9% in the April-June quarter. But this is not a technical recession, which is negative growth for two successive quarters, "But the growth rate is measured on a quarter-over-quarter, not a year-ago basis," wrote Jehangir Aziz. "In fact, we expect GDP growth in FY22 to recover to 12 percent from -9 percent in FY21, which implies that six quarters from now it will still be about 7 percent below the pre-pandemic path, or $300-billion-a-year income losses across two years, compared to the pre-pandemic path." "While not avoidable, much of the income loss could have been mitigated by budgetary income support. But the government chose not to provide this." "A collapse in imports during the coronavirus lockdown has left India awash with dollars," wrote Andy Mukherjee. "What the authorities have done so far -- scoop up the dollars by giving banks rupees -- has left the financial system swimming in money and threatens to fuel inflation that's already above the central bank's target." "A stronger rupee might help the central bank tame inflation; a liquidity glut will make it worse." "Hence, there's pressure on the governor to accept a more flexible inflation target: Politicians will want their V-shaped recovery at any cost." India will have "foreign currency reserves of close to $650 billion by 31 March 2022, and foreign exchange reserves totalling $700 billion", wrote Niranjan Rajadhyaksha. But this has fiscal costs. "Most likely, the PMO fears that a fiscal spending spree will send inflation soaring to 9%, the level at which voters have historically rebelled against the ruling party," wrote SA Aiyar. Better be careful about vibrancy of budget. May not stop vibrating.