BackQuick Edit | India’s twin deficit worries
Quick Edit | India’s twin deficit worries
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India lived under the long shadow of twin deficits at the end of its economic boom. Growing fiscal and current account deficits were warning signals that the country was living beyond its means.
The high current account deficit became a clear and present danger to economic stability after the global financial crisis worsened in September. Foreign investors pulled money out of India, sending the rupee into a tailspin and local interest rates sky high. India reported a balance of payments deficit for the October-December quarter, the first in seven years. In effect, forex inflows were not enough to fund the excess of imports over exports of goods and services.
Things have stabilized since. The Reserve Bank of India on Tuesday reported current account and balance of payments surpluses. That is good news in volatile times.
The fiscal gap continues to be a worry. The government said on Tuesday that the fiscal deficit for April and May was already 27.3% of the full-year target. We hope a clear plan for fiscal repair is unveiled in the budget due on Monday.
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