Column : Plan to waste
Cutting any expenditure, including digging a ditch and then filling it up, let’s be clear, has a contractionary impact on the economy in the first round. What matters, however, is what happens finally. If the contraction in government spending leads to a significant cut in the fiscal deficit—and assuming, as is the case, that the bulk of expenditure is for consumption and not investment—that’s beneficial since it lowers overall borrowing costs in the economy.
In general, the distinction between Plan and non-Plan expenditure is an arbitrary one and, for many years now, there has been talk of abolishing the distinction but nothing has ever happened. So, every year, the budget documents happily make this distinction and the lay reader assumes Plan expenditure is sacrosanct, of the nation-building variety, while non-Plan is less so. Nothing could be farther from the truth. Indeed, in FY13, the budget has a Plan expenditure of R5,21,025 crore of which R1,00,512 crore is on account of capital expenses and a non-Plan expenditure of R9,69,900 crore of which R1,04,304 crore is on account of capital expenses. Essentially, Plan expenditure
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