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MACROECONOMICS
In all of the cases, whether at the centre or at the level of the states, the limits to
the deficit are self-imposed and there are no sanctions when the deficit limits are
reached. As the rules are generally non-binding there are chances that they will be
set aside when economic and political expediency are required. This has already
occurred in India in 2005–2006 when the target for the revenue deficit was put
into a “pause” mode by the Finance Minister on account of a higher demand on
resources arising out of the award of the Twelfth Finance Commission.
A problem with rules for deficits then is that they are not ...
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