The main thing is that both fiscal deficit and current
account deficit are differences between income/revenue and expenditure.
Fiscal deficit is the difference between the government’s
total expenditures and its revenues (excluding money from borrowings).
Current account deficit is the difference between the
revenue earned by a country from its trade activities and its expenditure due
to imports.
Now that we’ve got the definitions out of the way, in a
sense both of them deal with either the positives of the negatives (in terms of
income/expenditure) that the country has. In India’s case, both are in negatives or we
have high deficit. Too bluntly (or
technically) put it we are in the red on the balance sheet.
There are many things that have led to this. An open economy, imports, manufacturing
practices, rules and regulations, easiness of setting up a business, subsidies/favors,
taxes (corporate), inflation, salaries, infusion of foreign capital and the
proper use, et cetera…
When you open up an economy to the outside world, this leads
to something called as innovation and brings in various methods and ways to
circumvent the rules and regulations (i.e., cheating/evasion). Any common that comes into power would like
its name to be remembered forever for the good things it does, and along the
way it tries to do things with a different approach.
Now, you must wonder why after more than 60+ (65) years
after independence from British rule we have not been able to become truly
independent from our archaic rules and regulations that the British had setup. We have now become a true software powerhouse
and in the coming years become a truly independent manufacturing powerhouse,
but with the current colonialist and dynasty type of ruling where the
government that comes into power, they try to get their loved ones and
relatives into prominent positions to help them later out.
This leads to the Indian economy again going down as the
deficit keeps on building up and there is a negative balance which needs to attain
zero or rise to the positive or plus side of the balance sheet. Unless there is a proper overhaul of the
current archaic rules and regulations and a serious and it the various
amendments and or repeal of these rules and regulations the Indian economy will
still be in tatters down the line.
Any government that is going to be in power needs to
look at the bottom-line of the economy, proper education and providence of food
and shelter to the needy, better building up of its workforce, all-round
development, and a boost to the roots of the economy.
The economy is struggling because of the deficit and it is
being protected due to the reason that whatever income or surplus (if at all
any) is being generated by the country goes into filling up the deficit that
has been created over the past 60+ years. The situation now is that however much we are
creating or producing is just not enough to fill that gap and the negativity or
bad side effect is that we’re still creating more deficit year over year which
still makes the deficit higher.
The government or we as the people have to look at ways to
get things going in a way that the Japanese, Korean, and Chinese people have
done. If you remember correctly, after
the Hiroshima bombing Japan was devastated, but with hard work and
determination they were able to turn themselves around and are now the world leaders
in manufacturing of various products. The sheer volume of which they are able to
maintain quality of their products at a lower rate and still beat out
competitors is truly amazing.
Our country (India) needs an all-round look into how we do
things on all aspects. There are many
areas where we are lacking (if you ask me, I would say in everything). It is not just the simple things that we look
to circumvent. Our dependence on
technology has risen to such a point that we are now not able to live without
it. When we buy things from a foreign
country it essentially means that the money we earn is going to that country or
it is flowing out of the country to simply put it.
Due to globalization and the three nations (Japanese, Korean,
and Chinese) capacity to mass produce on an exceptionally high scale, our local
manufacturers and producers are not able to keep up due to hindrances placed by
our own elected leaders.
When we do not have inbuilt production or manufacturing, we depend on outside assistance for products. You have to understand that for manufacturing or production there is the need for raw materials and importing that is somewhat of a good thing. But our dependence should not be on importing the full finished product, but should be on importing only the raw materials and exporting the finished products.
When you have less income and your expenses are high that is when you get either fiscal deficit or a current account deficit and this leads to our economy going down irrespective of whatever steps we take to bring it back up.
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