Former RBI chief cautions against fiscal profligacy

Mumbai: Former Reserve Bank Governor D Subbarao on Tuesday asked the government to ensure fiscal deficit is within the targeted number and warned that "fiscal profligacy" can lead to crisis situations.

The comments weeks after official data indicated that the government has exhausted 107 per cent of the budgeted deficit gap of 3.4 per cent with five months to go for the fiscal end.

"We got to be careful about managing our fiscal deficit and keep it within the fiscal deficit targets," Subbarao said.

Speaking over a video link at the Times Network's India Economic Conclave here, he said a higher fiscal deficit fuels inflation, crowds out private investment and impairs Balance of Payments (BoP) by resulting in current account deficit-related issues.

Subbarao said BoP-related issues, including the 1991 financial crisis and also the taper tantrums of 2013 during his governorship of the RBI can be traced back to "fiscal profligacy".