Deficits in the Accounts of Public Sector and the Black Economy in India

Studies on interrelationship between deficit, debt and national income are not rare in the field of public finance research in India. Most of the studies in this fashion either deal with the link between various deficits and macroeconomic variables or causality between deficits and macro variables especially debt and current account balance. This work is somewhat a maiden attempt to analyze the same issue in a rather different way. The link between deficit and debt with the macro economic variables like output and prices are discussed in the national income identities of John Mynard Keynes and Michael Kalecki. But the Keynesian National Income Identity has been widely criticized as it lacks causality. So the Keynesian identity has been modified by Kalecki in 1971. In Kaleckian National Income Identity deficit is important for the demand in the economy, which is what determining the output and prices.