Deficit is a myth, says A.P. CM Naidu

Andhra Pradesh Chief Minister N. Chandrababu Naidu has described the concept of deficit as a “myth”, arguing that conventional economic indicators should not be regarded as the sole measure of an economy’s health.

He addressed the media while releasing a White Paper on the State’s finances at the Secretariat on Tuesday.

Asked why the primary deficit was increasing despite the government’s success in saving ₹1,100 crore per annum through the renegotiation of interest rates on loans borrowed by the State, Mr. Naidu responded that there was a time when everyone spoke about fiscal discipline and fiscal deficit. “Today, nobody talks about the fiscal deficit. All these are merely figures shown for accounting purposes. They are arbitrary numbers. Earlier, we used to explain these things in technical language that ordinary people could not understand,” he said.

Describing himself as a student of economics, he said discussions on fiscal discipline and deficits had acquired disproportionate importance over the years.  “That is why I say the deficit is a myth. All these are figures shown for accounting purposes,” he said. 

Mr. Naidu questioned the emphasis placed on measures such as primary deficits, secondary deficits and debt-to-GSDP ratios, describing them as tools devised by economists to assess economic activity rather than as rigid limits.

Drawing a comparison between government finances and household budgets, Mr. Naidu said economic management could be understood in much simpler terms than the technical language often used by economists and policymakers. He observed that households generally focus on income, expenditure, savings and borrowing requirements rather than on complicated economic formulations.

According to him, governments should concentrate on mobilising resources, meeting expenditure requirements and ensuring sustainable growth instead of focusing exclusively on technical indicators.