An election-year syndrome

There is no doubt that meeting a widening current account deficit will be a challenge for the government, particularly in the run-up to the general elections

India’s macroeconomic fundamentals have a tendency to get worse about a year before the general elections. This may be a recent trend and there is also no causal connection between the holding of the elections and the macroeconomy coming under stress. But the coincidence is too stark to be ignored.

The Centre’s fiscal deficit in 2007-08 had declined to just 2.54 per cent of gross domestic product (GDP). Economic growth, measured by GDP at factor cost, was estimated at 9.3 per cent for that year. The current account deficit was 1.3 per cent of GDP. And retail inflation (measured by