In conversation with ET Now, Swanand Kelkar of Morgan Stanley Investment Management quotes Research Director and Senior Fellow, Niranjan Rajadhyaksha's recent paper on India's macroeconomic environment. Excerpts:

"Swanand Kelkar: The external side looks pretty okay. If you look at the current account deficit, I think we are headed towards a 2-2.5 per cent kind of situation, which is manageable in the Indian context. A year ago, this was a hot button issue, when crude oil was at 80 odd. People were wondering where the current account deficit is going to, how is it going to be funded and if it is going to take a knock. That is not so much of a worry right now. Fiscal deficit, though challenged in the sense of the room available to do things, is not a big worry either. 

ET Now: But it is challenging, nonetheless.

Swanand Kelkar: It is challenging. It does not allow a lot of headroom for you to do things. It is not a full-blown worry, and there is a worry on the other side of things which I feel is how inflation has undershot RBI’s target. If you think about four broad variables, and my friend Niranjan Rajadhyaksha at IDFC Institute has a great framework for this, which he calls a 2,4,6, 8 framework: current account deficit at 2%, inflation at 4% combined fiscal deficit at 6% and growth at 8%. If we achieve all four, that would be the Holy Grail of Indian macroeconomics..."

Read the whole conversation here.