The current economic slowdown is exposing challenges in how the country manages itself fiscally. First, it is well understood that a fixed annual fiscal deficit target is pro-cyclical, which means it makes a slowing economy go slower, and an accelerating economy go faster.
This is already visible: One of the most worrying aspects of the GDP statistics reported last week was that nominal GDP growth hit a 17-year low of 8 per cent. This explains the very slow growth in tax collections in the past few months, and means that government spending, budgeted to grow at 21 per cent but growing ...
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