“ fiscal policy and the inflation target ”, international journal of central banking, june ; and reifschneider, d. and williams, j. c. ( 2000 ), “ three lessons for monetary policy in a low - inflation era ” journal of money, credit and banking, no 32 ( 4 ), pp. 936 - 966. 6. see dreger, c. and reimers, h. - j. ( 2016 ), “ does public investment stimulate private investment? evidence for the euro area ”, economic modelling, vol. 58, november, pp. 154 - 158. 7. christiano, l., eichenbaum, m. and rebelo, s. ( 2011 ), “ when is the government spending multiplier large? ”, journal of political economy, vol. 119, no 1, the university of chicago press, pp. 78121 ; and coenen, g. et al. ( 2010 ), “ effects of fiscal stimulus in structural models ”, imf working paper series, vol. 10, no 73, international monetary fund. 8. cantore et al. ( 2017 ), “ optimal fiscal and monetary policy, debt crisis and management ”, macroeconomic dynamics, vol. 23, issue 3, april 2019, pp. 1166 – 1204 ; lorenzoni, g., and werning, i. ( 2019 ), " slow moving debt crises ", american economic review, 109 ( 9 ), 3229 - 3263 ; and jarocinski, m. and mackowiak, b. ( 2018 ), “ monetaryfiscal interactions and the euro area's malaise ”, journal of international economics, vol. 112, may, pp. 251 - 266. 9. see also giovannini et al. ( 2021 ), “ an early view on euro area risksharing during the covid - 19 crisis ”, vox eu column, 10 january. 10. see schmidt, s. and nakata, t. ( 2019 ), “ expectations - driven liquidity traps : implications for monetary and fiscal policy ”, working paper series, no 2304, ecb. 11. nakamura, e. and steinsson, j. ( 2018 ), “ high frequency identification of monetary non - neutrality : the information effect ”, quarterly journal of economics, 133 ( 3 ), pp. 1283 - 1330 ; and jarocinski,

. the traders and service sectors were looking for a higher demand for their goods and services translated into higher incomes for them. the rural income groups wanted the prices of their agriculture output raised. the large industrialists clamored for more concessions and exemptions in order to expand their operations. as far as the press was concerned a number of those who write on economic issues are either retired government officials subsisting on pensions and income from national savings schemes certificates or those earning salaries. their incomes have remained fixed and thus eroded in real purchasing power terms while the burden of higher expenditure particularly the utility bill charges hit them hard. these columnists and reporters extrapolate their own experiences and those of their peers to depict the adversity hitting the common man. they are therefore unsympathetic and unconvinced about any good emanating from this reform package. against these expectations what were the ground realities and what options were available. the preceding five year period had resulted in stagnant per capita incomes, no new large scale investment, rising unemployment and underemployment, worsening incidence of poverty, declining public expenditures and expanding fiscal deficits, an exceptionally high debt servicing burden, and dysfunctional public sector corporations hemorrhaging public finances. under these conditions, the new government was faced with two choices. the first option was to adopt a populist approach and use large scale public expenditures to create new employment opportunities, contracts for private sector, raise the level of aggregate demand and subsidise electricity, petroleum and gas prices so that the consumers are protected from increase in prices. in order to do so, an expansionary fiscal policy and an accommodating monetary policy were required to be pursued. in the short - term this set of policies would have won the applause from all classes domestically. from the viewpoint of the present government, which was in office for three years, this would have been an attractive and expedient solution because the disastrous consequences of these actions over the medium term would have been faced by their successors and not by them. what would have been the consequences of following this policy option? the country would have been forced to default on its external debt, fiscal deficit would have been around 10 per cent of gdp financed by borrowing, inflation rates would have hit the roof hurting the poor more than any one else, external and public debt burdens would have escalated, and private investors would have found an environment of macroeconomic instability. the international financial institutions would