While there are many causes for India’s current dismal economic state, the largest negative contributor is the manner in which its recent fiscal policy has evolved
Like every year, the end of 2013 provides an opportunity to reflect on what has transpired and what comes next. On the macroeconomic front, the most noteworthy development in 2013 was the elevated Current Account Deficit (CAD) in the first half of the year and its consequences in the second half. A lot of the narrative surrounding it has focussed on the Indian appetite for gold and its contribution to economic stress. Consequently, managing this appetite has been the focus of our remedial efforts as well. And while visible stress on the current account has reduced, without sustained initiatives to address the underlying causes, this is not a cure.
Since CAD is broadly equal to capital inflows, it can also be seen as the gap between domestic savings and investments.
(This story appears in the 24 January, 2014 issue of Forbes India. To visit our Archives, click here.)