These questions are important ones at this juncture. Take the fiscal scenario. The targets set by the Fiscal Responsibility and Budget Management Act will have run their course by 2009. But so far, the UPA government, while adhering to the Act, has given no indication if the constraints will continue to operate subsequently. On current indications, the government is straining at the Acts reins to go into fiscal profligacy mode. This would be a big error.
Look at the current level of public debt, which is about 80% of GDP. Public debt swells when the government contracts obligations like guarantees on loans raised by state entities, takes on repayment obligations for social sector schemes, and so on. Obviously, if let loose, the huge size of debt on a base of $1 trillion plus could send the economy twirling into a severe debt trap. Similarly, the fondness for public investment at the expense of restraints on the revenue deficit can injure growth prospects. Much of the current growth story owes itself to the space vacated by the government for private sector investment, which is vastly more efficient in multiplying money and raising the quality of citizens lives. By restating its commitment to the Act, the government should make it clear that it has the economys best interests in mind.