What Budget?....We Need Plumbers to Fix Leakages! Annual Budget of the government is most talked about on the day of presentation it self, with every thing pouring from admirers and critics on the same day, since TV channels have to do 24 x 7 job. So, I would restrain from commenting on the provisions of the budget itself. Budgeting For Elections: Annual ritual of presentation of union finance budget has lost it’s sheen of late with so many minibudgets during a year, with little regard for budgeted expenditure and leaking delivery system. Every budget with an impending election is an opportunity to please the vote bank and in a term of five year, every year there is election in one or other state or panchyats or zilla parishads, municipal corporation etc. So it is all weather season for freebies. Union Finance Minister Pranab Mukherjee presented the budget 200910 projecting a high gross fiscal deficit (center & states) of 10.8 % of GDP. This is not surprising for two reasons. First, Chidambaram had given a go by to FRBM by taking out largest unplanned chunks of expenditure, Rs. 70,000 crores of debt waiver to farmers out of purview of FRBM with deficit for 200809 soaring to a high of 11.5%. That was a small price to pay for coming back to power as UPA II. Secondly, global meltdown had its impact and the stimulus was essential to prevent the economy slipping into deeper recession. Pranab Mukherjee did reiterate commitment to FRBM targets in subsequent two financial years. In a one to one conversation around 1993, I happened to ask Dr. Man Mohan Singh, when he was Finance Minister, as to why India can not have something like Gramm Rudman Holling Act of USA for controlling fiscal deficit. He explained that India being a developing country was not yet ready then but was in favor at appropriate time. Now it is a sad precedence that FRBM can be bypassed or set aside when inconvenient politically. UPA has not yet finished its political agenda, mainly the forthcoming state elections, and so with focus on expenditure on social sectors (NREGA & others) with outlay of Rs.40, 000 crores, the deficit is expected to continue to pile up. Infrastructure projects get Rs.30, 000 crores with provision of budgetary support of Rs.100, 000 crores. So what can be expected out of the expenditure planned till end of March 2010? The government will borrow the money for these projects in social sectors. The budgeted expenditure of Rs.70, 000 crores will be incurred in the social and infrastructure sectors, but the progress on ground level will be far from the targets with the result that there would be hardly any spin off felt in terms of economic boost in current fiscal. On the contrary, heavy borrowing of the government would push other borrowers from industry out of the market and inflation through the roof. Interest rates would go up due to paucity of credit and industry would be severally punished delaying the economic turn around.
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