Populist measures such as farm loan waivers are likely to push up the aggregate fiscal deficit of the states to 3.2% in FY20, higher than the FY19 mid-year outlook forecast of 2.8%, according to India Ratings report. "The competitive populism, in the nature of farm loan waivers and other financial support schemes, would take the centre stage in the run-up to next general elections in April-May. A larger impact is expected on fiscal and revenue deficit to state GDP ratios for MP, Kerala and Rajasthan, among non-special category states, in FY20," the agency said in a report Monday.
Indian rupee has turned into the worst performing Asian currency from being the best just two weeks back. A rebound in global oil prices and concerns over farm loan waivers has reversed the gains made by the domestic currency. Funds are instead accumulating the Indonesian rupiah and Chinese yuan on optimism over trade talks and signs of a Federal Reserve rate hike pause. India relies on oil imports to meet about 80% of its requirements. Every $10 rise in oil prices widens the current-account gap by $12.5 billion, according to a central bank study.