Fiscal fault lines

Govt finances might affect economic recovery

The Indian economy contracted at a much slower pace in the second quarter of the current fiscal year. While the pace of recovery surprised most analysts, the finance ministry is confident that the economy would stage a much better performance in the third quarter. In its monthly economic report for November released on Thursday, the ministry said the V-shaped recovery reflected the robustness of the economy. The reality, however, may be different. One of the biggest constraints for demand would be the state of government finances, both at the Central and state levels. The second-quarter data also showed a sharp