## Tuesday, February 26, 2008

### How much progress on the fiscal deficit?

Ila Patnaik puts together the facts on deficit reduction, and off-balance sheet items.

You might like to see the recent IMF document, and an article of mine that (among other things) takes stock of India's progress towards fiscal stability. I emphasise three key tests of fiscal stability:

1. The debt/GDP ratio should drop in all years, barring rare calamities;
2. Government bonds should be voluntarily purchased by well motivated actors (i.e. not force-fed through financial repression or to PSU financial firms) and
3. Measurement of deficits and debt should be correct.

At present, India fails on all three counts.

Please note: LaTeX mathematics works. This means that if you want to say $10 you have to say \$10.
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