Interesting point - is the Indian economy witnessing a structural reduction in fiscal deficit? This suggestion, made with utmost seriousness by a fund manager recently had me thinking. Perhaps the recent increase in fuel prices, and some changes in fertilizer policy motivated this comment? So here's my take - fiscal deficit cannot be reduced in a democratic country with income disparities as wide as India - not now, not ever (perhaps). We've had "free" pricing of fuel earlier - when the OCC was abolished. Till the need to tax fuel oil higher, and higher prices of crude combined with a pre-elecction period forced a reversion to price control. And yes, even then, Reliance had a retail distribution - that had to be shut down. So Murli Deora and his closeness to the above mentioned industrial house notwithstanding, only low crude prices (and not government policy) can prevent a recurrence of governmental interference in oil pricing.
The government spend is increasing at a trend rate higher than income. Public sector salaries are linked to an inflation rate that is galloping. Endemic corruption increases cost of service delivery across a bloated governmental apparatus. Pension liabilities are unfunded and the government is populist. Its easier to believe that I have goblins living in my closet.
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