Sixth Pay Commission: Truth deficit
The finance minister has finally admitted that the Government will not meet its deficit targets this year. He said that India
“may overshoot” its targets, which is a little like saying that Jaipur lies “just beyond” Gurgaon. The apparent justification
for his attempt to minimise the fiscal irresponsibility that has caused India’s public debt to balloon is that he expects the
fiscal deficit, which is supposed to be not more than 2.5 per cent of national income this year, to be only a few tenths of a
percentage point higher. In fact, P. Chidambaram managed to sound almost self-congratulatory about it. This is an
unacceptable sleight of hand.
The only reason that the numbers appear so acceptable — surely a few tenths of a point are affordable, in this of all years?
— is that the government ignores in its figures, keeps off its balance sheet, like a tottering investment bank precisely
those items that have ballooned. Oil bonds, issued to cushion the losses that the state is making from its ruinous subsidy
schemes: Rs 40,000 crore. The waiving of agricultural debt: Rs 70,000 crore. Fertiliser bonds, issued to prop up another
subsidy scheme long past its sell-by date: Rs 7500 crore. The Sixth Pay Commission, after renegotiation, emotional blackmail
and retrospective payments: Rs 22,000 crore. Claiming that this isn’t government expenditure: priceless. Nobody knows for
certain what the real gap between the government’s expenditure and income, taking into account all these things, would be;
but it certainly wouldn’t be under 3 per cent.
The FM, to his credit, has acknowledged in the past that these expenditures need to be brought onto the government’s balance
sheet. That was, however, before the global Oil price rise, which threw his calculations off. What is needed is plainer
speaking: as the public debt grows unsustainable, private saving gets crowded out, and investment in infrastructure — India’s
future — becomes more difficult. Acknowledgement of the problem is the first step. The next is to reframe the next iteration
of the Fiscal Responsibility and Budget Management Act, which sets deficit reduction targets, to close these loopholes. Minimising the problem won’t help.
Source: http://www.indianexpress.com/
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