Milk, meat, egg, pulses, wheat and many other food items even in the latest Wholesale Price Index (WPI) have become at least 11 per cent more expensive.

This, however, may give some 'relief' to the Government and the organised sector as it can cut down on dearness allowance payment to the employees as overall WPI shows a fall. The WPI is deceptive. Every increase, howsoever small, even of 0.8 per cent as indicated in the food index, is over the high spurt of the last two years.

It only indicates that living in India has become very expensive. The comfort zone has hurt the middle class, which was supposed to lead the growth. The slowdown in industry, manufacturing and other sectors speaks volumes in terms of the stress of the middle class. It is finding the going tough to remain on the edge of the poverty line.

In simple terms, it is an indicator of thaw in consumerism. The adverse impacts are too obvious. The top 100 companies have their cash balances hit. It rebounds on the Government as its advance tax collection comes down.

This apart, indications are that the fiscal scenario looms near a dark horizon. Finance Minister Pranab Mukherjee has acknowledged he would not be able to meet the deficit target of 4.6 per cent of the GDP this financial year. This is so, because he has already breached his expenditure target by Rs 55,000 crore, which may be more in the coming months.

Indeed, not happy news. In the next budget he has to make it up either by increasing taxes, which are already at an unrealistically high level or by cutting down the expenditure. Both are prescriptions for further slowdown.

The Government harps on reforms - euphemism for continuing the 1991 path of corporatised growth. But in reality it has never thought of reforming the system. The Direct Tax Code has emerged as a sham and as complex as the Income Tax Act 1961. It has not moved an inch forward to either reduce taxes or ensure simplification of the procedures vital to put the economy back on track.

Worse, it has burdened the poor and middle class bank depositors with large deductions at source. The TDS on deposits has in reality diverted large funds from the banks to inflate the so-called black money. It also has put stress on the banking system as it has gone into a severe deposit crunch.

Of late, the FDI trend only shows that India is not the destination for global investors. Red tapism, corruption and a falling rupee, which many predict might breach the Rs 60 to a dollar mark, are major obstructions. The others being investors have found interesting destinations in Vietnam, Mexico, Brazil, Indonesia and even China.

Sadly, the country has not cared to correct its approach on these scores, which it should have done long back. The fallout may be disastrous. The managers of economy wish it away as all of this may lead the country to a borrowing trap again. Managers do not like to call it a debt trap since most Indian borrowings are yet not subscribed by outsiders and thus it is 'internal'.

It is pertinent to note that Greece too had its debt largely internal or funded by Germany, Italy, France, the UK or Spain supposedly backed by a strong Euro. However, now Italy, Spain and even France are coming into the same trap for fiscal profligacy.

Here too, the Government's profligacy in borrowings is leading to inflation and high cost of bank credit making private investments expensive. This leads to further spurt in prices and stymieing of growth. India needs to debate and decide the right path. If it does not, it may lead the country to continuation of the crisis or even worse. As a result, the cheer may remain distant in the New Year.