Thus, of the total amount of Rs 68.8 billion intended to be raised, on current reckoning, only Rs 32.8 billion or 48 per cent is likely to be actually generated. Besides, various government undertakings likes railways (a burden of Rs 62 billion against the budgetary allocation of Rs 34 billion), posts and telegraphs, and defence services also would have to raise salaries, the impact of which will come partly through hikes in freights, fares and prices, etc, as the case may be, or through the additional budgetary allocation. Food subsidy, under the increased public distribution system, will also have to be raised.

All things considered, therefore, there is likely to be an additional burden of Rs 100 billion on the Budget, resulting in raising the FDR above 5 per cent from the budgeted 4.5 per cent. By implication, this means that the Indian fiscal situation, despite sincere efforts, has become a victim of the 5 per cent FDR syndrome. It was 5.5 per cent in 1995-96, 5 per cent in 1996-97 (revised estimates) and is again likely to be somewhat above 5 per cent in 1997-98.

Given the compulsions of the political economy of the vast and poor democratic country, where on an average 52.5 per cent of the people live with less than $1 (on purchasing power parity basis in 1981-95 according to the World Bank), it is not easy to significantly reduce non-plan expenditure like food subsidies, salaries or administrative expenditure of the government.

On the contrary, salaries of central government employees had to be raised. Political compulsion also did not allow the government to reduce the number of employees as recommended by the Pay Commission. There is no social security measures in the country for the people to fall back in the event of retrenchment.

It has also been proved difficult to reduce FDR to the desired level, although the overall tax and non-tax revenues have more than doubled during the post-reform years (from Rs 741.3 billion in 1992-93 to Rs 1,531.4 billion in 1997-98). At the same time, the total expenditure has also increased by 1.9 times from Rs 1,226.2 billion to Rs 2,321.8 billion during this period. Interestingly, growth of non-plan expenditure almost doubled, as compared to the growth of plan expenditure, which grew by 1.7 times.

In the endeavour of fiscal management, the plan expenditure, therefore, had to be cut, causing slowdown in infrastructure and industrial production. It is, indeed, not a very enviable situation for an economy in transition.

The point is that efforts are on to reduce the fiscal deficit, both by trying to raise resources as well as reduce expenditure, as far as the finance minister of a 14-party coalition government can go. It is obviously going to take some time for the FDR to come down significantly to the desirable level of, say 3 to 3.5 percent.

What makes fiscal sense does not, unfortunately, make political sense in the present Indian context. In fact, any move to sharply reduce FDR within a short time could boomerang through the ballot box. Perhaps, the Indian fiscal situation can improve slowly like most of the other economic indicators, not at the ‘tigerish’ pace, but by its own slow and steady ‘elephantine’ way!

Illustratively, the GDP growth has been on an average around 7 per cent year during the last three years as against the desirable rate of 9 per cent plus. When one sees that the tigers in the South East Asia are out of breadth after running fast for quite sometime, one might opt for the time being for a healthy elephant.

Jiban K Mukhopadhyay is a senior economist at Tata Services Limited, Bombay. The views expressed are his own.