The dust has barely settled from the state election results announced last week, but our prediction that they would trigger a spate of fiscal giveaways is already being borne out. Farmer loan waivers have been announced in several states and we think more will follow suit ahead of next year’s general election. Prime Minister Modi also laid the foundation for a series of tax cuts this week. It now looks virtually impossible for the government to meet its target of reducing the budget deficit to 3.3% of GDP this fiscal year.
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