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Fiscal deficit at 3%: A sensible target despite questions about its origin

The number wasn't imported from the Maastricht Treaty, but is a synthesis of the experiences of various countries within and outside the accord

Subhomoy Bhattacharjee  |  New Delhi 

From where did the authors of the original Fiscal Responsibility and Budget Management (FRBM) Act arrive at three per cent as the number for a prudent level of fiscal deficit of the Centre? It was not an import from the Maastricht Treaty, says Dr E A S Sarma, the then economic affairs secretary who principally authored the bill. “We did simulations around several numbers, principally to inform us at which levels the interest burden would become unsustainable,” he told Business Standard.

The questions around the number are far more than academic ones, especially this year. ...

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First Published: Wed, January 01 2020. 13:49 IST
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