Column : Paying the bill

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: Rs 2,72,709.44 crore. That’s how much the Centre’s expenditure bill has shot up since 2007-08. 2007-08 was, of course, a good year. The picture has changed drastically since then and so have government policies, with stimulating the economy taking precedence over fiscal prudence. In 2008-09, the Centre’s total expenses increased by over Rs 1.5 lakh crore (from Rs 7,50,883.53 crore in 2007-08) to more than Rs 9 lakh crore. The Interim Budget estimates for 2009-10 has pegged annual expenditure even higher at Rs 9,53,230.95 crore.

Though it is back with a stronger mandate, the UPA would still need a sort of post-poll extravaganza for voters as well as extended stimulus for labour-intensive sectors, partly with an eye on the upcoming assembly polls in major states like Maharashtra. So in all probability, the Budget for 2009-10 will mark a new high in the Centre’s baseline expenditures, around Rs 10 lakh crore. While already abandoned, fiscal targets under the FRBM Act are likely to be reset with a less specific ‘medium-term’ outlook, the worry is that Rs 10 lakh crore may well become the new benchmark for central spending.

No government can afford to trim this bill too heavily in the future, as it would imply a cut in allocations for one sector or another—unacceptable to most cabinet members. Tax sops too can be only partially rolled back in subsequent budgets. North Block has been asking ministries to adopt ‘austerity’ measures to control expenditure in recent years, but it amounts to little. With the fiscal deficit reaching a quarter of the full year target in just two months of 2009-10, the Centre should take stock of the efficacy of existing austerity steps. More importantly, while the UPA sets a new fiscal roadmap, it must remember that it may not always pay to bring in a ‘popular’ or a populist Budget.