In 2008-09, the government plans to borrow (gross) Rs 1,35,000 crore and RBI figures show 78.52% of planned borrowing has been done in the first six months. The bonds have been at interest rates between 7.38% and 8.33% and cut-off prices on 364-day treasury bills have been marginally higher. This is not the only way government pre-empts funds from private uses and upshot of pre-emption is both lack of liquidity and higher interest rates. Ostensibly, the government is on an austerity drive. But that is not reflected in supplementary grants. One can understand the clubbing of third supplementary demand for grants (usually in Budget session) with the second demand (winter session) because there might not be a Budget session. However, Sixth Pay Commission, oil and fertiliser bonds, farm debt waiver and Bihar rehabilitation notwithstanding, one cannot understand the magnitude of these supplementary grants, authorising additional gross expenditure of Rs 2,37,286 crore. Numbers don?t add up and it is unfortunate that these demands were passed by Parliament without demur. If there?s extra spending for growth boosting, shouldn?t the House have discussed such a plan a bit? Also, the government claims that additional net cash outgo is only Rs 1,05,614 crore, the remainder is apparently taken care of through savings of ministries/departments and enhanced receipts & recoveries. No details are available on the latter; so no firm conclusion is possible.
The Sixth Pay Commission awards amount to Rs 22,100 crore, farm debt waiver Rs 71,680 crore, fertiliser bonds Rs 7,500 crore and oil bonds an additional Rs 39,364 crore. The point is that numbers for these are known expenditure. Add Rs 10,500 crore more spending for National Rural Employment Guarantee Scheme. All that still leaves almost Rs 1,00,000 crore unaccounted for. As we said, if this is tactical deficit financing, why not say so and have a discussion? Pessimists will conclude otherwise that the money will be spent on so-called flagship schemes of dubious value. Each of four governments since 1991 hasn?t deviated from the goal of reducing deficits and has had varying degrees of success. The UPA government is making a virtue of deviation, but not being clear about all facts and intents. On paper, fiscal deficit is expected to be 2.5% of GDP in 2008-09 and in 2007-08 gross fiscal deficit (including states) was 5.5%. Fiscal deficit is more than a goal in FRBM Act?deficits have substantive consequences. With deficits properly accounted for and off-Budget items (like oil and fertiliser bonds) included, the Centre?s contribution to the deficit is more like 6% now, taking the gross deficit close to pre-reform levels of 10%. This is one instance where states can?t be blamed.
