Jalan concerned about growing fiscal deficit, but not falling rupee

Our Economic Bureau

New Delhi, May 22: RESERVE Bank of India governor Bimal Jalan has dismissed concerns over the falling rupee. He told reporters on the sidelines of a seminar here on Tuesday that “there was no need to worry on account of the rupee.”

Earlier, in his closing address at a seminar on ‘India: fiscal policies to accelerate economic growth’ organised by the World Bank, NIPFP and the finance ministry, Dr Jalan expressed concern at the growing fiscal deficit and observed that the capacity of markets to absorb government paper was reaching near-saturation.

He also regretted the fact that more money was being spent on controlling the fiscal deficit without any visible effect. He pointed out that over 80 per cent government expenditure went to the benefit of public servants, contractors, etc, and not to the public at large. This was one reason why vested interests opposed any move to reducing government expenditure, he noted.

The RBI governor said after nearly three decades of debate, the time had come for transparency and to inform the public exactly where and on whom public expenditure was being incurred. Indeed, the problem lay in the fact that this was “privatisation” of public service and the fiscal deficit was in reality a “motivational deficit”.

The approach paper to the 10th Plan had brought out the startling fact that while Rs 32,000 crore had been allocated for rural development, diesel subsidy, etc, barely Rs 1,700 crore had been set aside for irrigation. He said states and the Centre must evaluate the productivity of various departments and organisations under them.

He called for dedication of funds with disempowerment of states and the Centre in new projects. All expenditure was already committed to projects that were always, either, “half-or-quarter-finished,” he remarked.