Hiding the Fiscal Deficit

It turns out that the UPA government, which presided over the boom phase of the business cycle has ended its term with an incredibly high fiscal deficit. It got away with its legal responsibility to keep the budget within limits by keeping them within limits on paper and simply spending more than it was allowed. Chidambaram’s response to those who pointed out that he had not actually provided funding for the NREGA was, in effect “Trust me. Do you think I am so stupid as to not provide funds for such an important scheme?” Now, we will enter the bust phase of the cycle burdened with a huge deficit. For some reason, I am reminded of the discussion I got into here.

7 thoughts on “Hiding the Fiscal Deficit

  1. Essentially, we continue to follow the Brits closely years after Independence. Gordon Brown presided over the longest period of prosperity (evanescent, as it turned out) in Britain and spent and spent all the revenues, to bequeath Britain with a massive deficit when he could have built up a surplus. Now, when he needs really to spend to dig the country out of a hole, he has almost nowhere to turn to get the money (well, short of printing it). Desh is no different, eh? A few ratings downgrades and voila.

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