The six men who make up the Prime Minister’s economic advisory council are among the finest minds in the country. They surely know that India’s macroeconomic tapestry is frayed—perhaps close to being in tatters. Yet, they have let the government off the hook in the new report on the economic outlook for this year, which was made public on Wednesday.
But there are enough harsh truths between the lines. While making all the right noises about how the government’s finances have improved, the council also adds that the so-called off-budget liabilities—subsidies, farm loan waiver, civil service pay hikes and the underfunding of the rural jobs scheme —will add up to 5% of the gross domestic product, or GDP. That means the “real” fiscal deficit will be close to 7.5% of GDP, the highest since the crisis year of 1990-91.
The forecast deficit on the current account is 3.2% of GDP, the highest ever for India. We would have liked a tougher report to the PM.