The fiscal deficit in India is a growing monster that can gobble up our peace and put our national security at serious risk. There is a national debate on this. There are men on the fringes including many workers who have no clue about it. It nevertheless affects their life. And when it gets out of hand there will be anarchy on the streets. So its seriousness has to be understood because it will impact the future of your family.
The fiscal deficit including the Center and the states is pegged at about 10.3 percent of GDP and is perhaps one of the highest in the world. With government loosening its purse strings on all kinds of social stimulus, subsidy and unemployment benefits, it will be borrowing continuously beyond its means to sustain the momentum and thus increase interest burdens. With the economy under serious recessionary pressures and the monsoon playing havoc, overall production, employment and consumption will dramatically decline and the revenue earning capacity of the government will wean causing untold miseries to the unsuspecting public at large. In these difficult times, spending pressures will become inevitable and therefore likely to become a permanent feature of our budget. This is a real danger. Prudent financial management is as important for a national government as it is for every individual.
The recent budget of the new government was expected to give us a general guidance of its ability to bridge the gap between dwindling revenues and ballooning expenditure. It was expected to provide us a clear picture as to how the government was discharging its fiscal responsibility and how the much needed reform process is likely to unfold not only to fill the coffers of the government but to reduce the government’s role in business. Unfortunately the mandarins are playing their cards close to their chest with the usual tricks of hide and seek verbose.
There appears to be fear, uncertainty and doubt in the minds of people in the government about being transparent and accountable for the vast proportion of the resources that they command. Take a look at the Fiscal Responsibility and Budget Management Act of 2003, with only 13 sections. This is an Act to “ensure inter-generational equity in fiscal management and macro-economic stability”, but fails to address important matters that are integral to the intent of the Act.
Fear is manifested in Sections 10 and 11 dealing with protection of action taken in good faith and barring the courts from questioning the legality of actions taken under the Act. Now the government is seeking amendment to this very Act that was trying to bring some semblance of accountability and responsibility because it has failed to contain the fiscal deficit as set out in the FRBM Act. If you can’t score the goals, change the goal post.
Compare this with the South African Public Finance Management Act . This has 95 sections with far-reaching provisions that even defines “fruitless and wasteful expenditure” as
” expenditure that was made in vain and would have been avoided had reasonable care been exercised;”
There are criminal punishments for fruitless and wasteful expenditure under the provisions of the South African Laws. South Africa is a new democracy and we in India brag about being a democratic nation. But what is sauce for the goose is not sauce for the gander.
Read all these with the recent submissions of the Comptroller & Audit General of India’s candid audit reports as to how government undertakings fudge their numbers (Report 22 of 2009-10) . As many as 53 government companies have failed to publish their annual accounts, some for several years. There are ministries associated with each of these companies. Are the directors or the ministers brought to book for squandering public money?
What is really our fiscal deficit, no one has a clue about it. My article on this written about two years ago is still begging this question – What is our real fiscal deficit? I, for one am sure, will never get an answer in my lifetime.