The economic situation that the United Progressive Alliance has left behind has been called the winner’s curse by some commentators. But things are better off than a year ago when P. Chidambaram took over as finance minister from Pranab Mukherjee .

In fiscal 2013-14, the combined deficits shrank below 6%, about 3.5 percentage points lower than a year ago. It is also better than what Chidambaram and Yashwant Sinha had faced when they presented their first budgets in 1996 and 1998 respectively. Sure, inflation is high and growth is low; but the Mint Misery Index shows that economic conditions for common citizens have also improved a bit.

The previous government’s (and Reserve Bank of India’s) measures to prune the current account deficit have clearly borne fruit. The fiscal deficit of 4.47% is also a positive. At least for now, the threats of a ratings downgrade have been staved off.

There are questions about whether this can sustain. Unpaid subsidy payments on foods, fuel and fertilizers are expected to cross ₹ 1 trillion. After taking charge, finance minister Arun Jaitley pointedly talked about settling a “lot of unpaid bills".

The fiscal deficit for the first two months of this financial year is almost half the budgeted amount. Clearly, the way forward for the new finance minister is to pursue reforms in sectors such as power and mining, and step up disinvestment. That will not only narrow the fiscal deficit, but also reduce the savings-investment gap, helping the current account deficit.

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