Indian economy deteriorating fast mimicking 1991 crisis
Aniridh Patnagar
May 27, 2012

If you can trust the numbers, India is headed for a disaster like 1991. Some Indian economists claim talk of 1991 may be overblown, at least for now. But that is how economists have reacted before every economic and fiscal disaster in the world.

India's current account deficit in 1991 was 3% of GDP, today it is hovering at 4%. The fiscal deficit in 1991 was almost 8% of GDP and that was just for the central government. The deficit right now is a tad lower than 6%, better than 1991 but hardly comfortable. The biggest problem is that if Indian economy slows down even to 5% annual growth, the fiscal deficit will explode to almost 12% of GDP. The other problem is that in 1991 the personal debt burden of average Indian was almost nonexistent. Today, if the economy slows, the debt service requirements of average will break the backbone of the average Indian consumer. Personal debt load of average Indians is so high compared to 1991, India can easily get hit with mega depression and massive fiscal crisis unimaginable at this stage.

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