Prevention better than cure | Business Standard

Prevention better than cure | Business Standard

While the adage ‘Prevention better than cure’ cannot be faulted, correct diagnosis of the problem is important for prescribing steps towards cure. It is true that both fiscal deficit and current account deficit are slipping from the hands of FM who has been braving optimistic statements in different fora, based on figures ‘cooked for the occasion’. The present situation is attributable to unbridled dependence on import of essential commodities like oil and not so essential luxuries like gold, besides total absence of control on extravagant lifestyle. While full convertibility of currency has been rightly delayed or postponed, spending on import of toys to aircrafts, floor tiles to machinery for theme parks, expenditure on travel abroad are not budgeted and accounted factoring in the matching of export-import costs and benefits. Though there has been sincere effort from the side of RBI to bring down gold import, there has not been perceptible policy support or even a realistic effort to create awareness among people about the need to put into productive use the domestic stock of gold or reducing the appetite for accumulation of gold and gold ornaments. IMF will be too willing to extend ‘Flexible Credit Line’ as the return on investment for those who participate in providing funds will be reasonably good, besides the chances of timely repayment going by the past records of this country. The ‘icing’ would be a chance to impose conditionalities, sometimes disproportionate to the line of credit. Self-reliance is not a bad idea. Neither is borrowing for productive purposes. But, leaving everything to market forces or taking short-term view of long-term liabilities may take the country into an irretrievably deep debt trap. Sooner we approach financial planning with the seriousness GOI perceived finances and economic development during the initial years of planning the better for India!


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