Fiscal math under threat

Finance minister P Chidambaram, who astounded most when he managed to contain FY13’s fiscal deficit despite the dramatically lower GDP growth than originally projected, needs to pull out another rabbit from his hat in FY14. While growth targets are once again looking dicey, the bigger problem is that the growth collapse has taken place even while government expenditure has grown at its fastest in the last 7 quarters. Had government expenditure not risen by 10.5% in the quarter, Q1 GDP would have risen by just 3.7%, not the headline 4.4%.

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