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'Everyone is worried about lack of courage in handling the fiscal deficit problem'

BUDGET 2000

I> am seriously worried about the fiscal deficit going completely out of control. The FM had budgeted the fiscal deficit to be less than Rs 800 billion in the last Budget. He has overshot the target by Rs 290 billion, or 36 per cent.

There is nothing in this Budget towards correcting this fiscal imbalance or curbing revenue expenditure. Considering this was the first budget of a new government, it is highly disappointing. There was so much hype about a hard Budget that people were prepared, particularly in the background of Kargil, Orissa and the election. But the FM hesitated.

Perhaps this, taken together with backtracking on the petroleum price increase, shows the political weakness of the government.

The Congress governments, from 1991 to 1996, clearly reversed the trend of high fiscal deficits. It is nobody's case that the fiscal deficit should be zero. All we are saying is that it should be manageable. The combined fiscal deficit of the Centre and states has gone to the level of the crisis years of 1990-1991. This has to worry us.

As you have seen, the initial reaction was very negative. And rightly so. There are no structural initiatives as were expected by the capital market. On lowering interest rates, or trying to address problems likely to arise as a result of quicker phase-out of QRs that could affect many sectors of industry, or even the direction of excise duties.

There is nothing for the core sector or anything that will boost the primary market. But primarily everyone is worried about lack of courage in handling the fiscal deficit problem. We are almost in a debt trap.

Let the figures speak for themselves. Interest payment is budgeted to be Rs 1012.66 billion. This will be 49.7 per cent of our entire revenue receipts of Rs 2036.73 billion. Our total debt service outflow, including repayment of debt and interest, will, at Rs 2,256.83 billion, be much more than the revenue earned. That means we will have to borrow to pay salaries and entire development expenditure. Net borrowing next year of Rs 1,110 billion will add more than 100 billion to our interest outflow. I am worried.

If you look at the performance of the last Congress government, we inherited the economy in an absolute mess, virtually on the brink of bankruptcy. The reforms and the hard measures taken by Dr Manmohan Singh not only pulled us back from the brink, but the gross domestic product growth rate reached nearly eight per cent in a sustained manner.

The last year before the election is always a problem for any government, when it is difficult to take very unpopular decisions. But you'll agree that when the Congress left office, the economic fundamentals were very strong and we had a industrial growth rate of over 12 per cent, an export growth rate of over 20 per cent and a GDP growth rate of over eight per cent -- a feat no government since has able to match.

Prithviraj Chavan is a Congress leader.

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