Budget 2013: To prosperity or perdition?
Those who argue that India can still finance a CAD and fiscal deficit of 3% indefinitely seem unfamiliar with the Krishnan dictum that “the long-term has caught up with us”. Consider the mess in the eurozone, where it was a tenet of public faith that one could finance budget deficits of 3% indefinitely. The result: the eurozone is over-indebted, in deep crisis, and will take years of reform to pull itself out, while sacrificing a generation in the process. No deficit is sustainable forever. If one runs deficits for too long, one has to aim at running surpluses in the future. Being incontinent for forty years (as India has been) has the same effect as being profligate for ten. We have been both. Will the Budget aim at the ‘impossible dream’ of establishing the foundations for generating future surpluses or will it continue to aim at ‘least-worst sub-optimisation’ that has become the leitmotif of the UPA-led government?
The last few weeks have seen an inexhaustible flow of gratuitous, unsolicited advice to the FM in the media and other fora. Fortunately for us—with his extraordinary intellect and reserves of (uncommon) common sense—he will ignore 99% of it. Thank heaven that for this Budget we have an FM in situ who understands intuitively India’s globalised economy
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