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Govt’s stimulus may not be effective: JPMorgan

Posted by Manish Agrawal on Monday, 8 December, 2008

JPMorgan said on Monday it was sceptical about the government’s ability to boost spending in the remaining months of the 2008/09 fiscal year, given its preoccupation with elections. 

The government on Sunday unveiled a $4 billion stimulus package of extra spending for the rest of this fiscal. The government will also issue an extra $9 billion of bonds by Feb. 20, slightly higher than market expectations of $6-$8 billion. 

JPMorgan said the government might implement additional measures in the coming weeks but concerns exists that from the time of the announcement of the next election date and the formation of the new government, major fiscal policy change will not be possible under the Election Commission rules. 

This period could be as long as 3-4 months and could rule out any significant counter-cyclical measure in the first quarter of 2009, it said.



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