A next generation fiscal framework

It may be time to set up a Centre-state council for expenditure, and to re-anchor bond markets

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