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India’s macroeconomic challenges: some Reserve Bank perspectives

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Dr. Duvvuri Subbarao: An argument against de-subsidization is that it will be inflationary. Sure, it will be inflationary in the short-term, but price pressures will even out over the medium term. Also, the inflation impact should not be overstated. To the extent lower subsidies result in a lower fiscal deficit, there would be some disinflationary impact even in the short-term.  Finally, reduction in subsidies will remove price distortions, improve  efficiency and provide a much better investment environment. Read More

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