India, May 14 -- The economic situation, on account of the geo-economic impact of the war in West Asia and India's decision to kick the can down the road till after the assembly elections, is worrying, if not critical. The problem three-pronged: a rising import bill because of high energy prices, the rupee's depreciation adding to the import bill pain, and capital outflows putting a squeeze on the capital-account elbow room the economy has, to manage its current account deficit. The first is outside India's control. The second can be mitigated to some extent, but this has limits (exhausting foreign exchange reserves) and costs (exports losing competitiveness). The third is a problem that predates the war and has only become more acute since. Business-as-usual can lead to significant deterioration in the second and the third. So, what is to be done? As these pages pointed out earlier, the only solution is calibrated demand deflation, focusing on the current account deficit. Some of it, such as buying fertilisers at much higher prices, is a given; their lack can trigger a food security crisis. Measures such as increasing fuel prices and reducing fuel consumption should have been implemented by now. Only the government can explain why it is still holding back. Instead, what we are witnessing in both the political and business spheres are comments advising prudence and calling for austerity that suggest a deeper crisis, and symbolic gestures that are unlikely to make a dent. Both have little tangible utility as far as mitigating the situation is concerned, but they are spooking investor sentiment, with speculation running wild about the imminence of drastic measures including capital controls - the proverbial mayday tactics. This is not helping the fight in tackling the second and third challenges listed above. India has a structural constraint as a country that runs a large current account deficit. It must be able to source large capital inflows to balance its current account. The ongoing external turbulence has exacerbated this asymmetry by pushing both the variables in adverse directions. Solving this structural problem is a long-term challenge. The most prudent course at present is to work on making the current and capital account situation less adverse. This requires clarity in communicating to the markets and investors - a job best left to the financial policy technocracy once the political leadership has taken a decision. Time is of the essence here....