The bigger part of the stimulus should be spent on infrastructure and, perhaps, on urban housing.

Synopsis

As long as Covid-19-induced regulation or personal hesitation prevented workers from coming to work, an expansion of demand would not have translated into additional output.

By Arvind PanagariyaAs the economy recovers from the massive shocks that Covid-19 administered to both demand and supply, three short-term policy questions are: is there a need for fiscal stimulus? If yes, how much? And what form should the stimulus take? Similar questions may be asked on monetary policy, but they are not discussed in this column. Fiscal stimulus can help when production capacity is underutilised due to deficient demand. As long

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