Delink the deficits: Linking revenue and fiscal deficits will lead nowhere

Revenue deficit comprises political payouts that are impossible to reduce in any significant measure. Minimising political risk means increasing revenue deficit

A former finance minister has, in response to an article by the current chairman of this newspaper that the 3 per cent fiscal deficit target should be relaxed, written back that this can be done, provided the revenue deficit is eliminated and the excess of expenditure over revenue is invested, rather than consumed. 

I have two problems with this response.

One is that Keynes made no such distinction and all deficit was for increasing consumption. That’s what he had meant by paying people for digging holes in the ground. 

Second, while reductions in the revenue deficit increase political risk, increases in investment