The Union Budget for 2020-21 presented to the Parliament by the Finance Minister, Nirmala Sitharaman on February 1, 2020, confirms apprehension that the actual fiscal deficit [FD] for 2019-20 would exceed the budget estimate [BE] by a significant margin. Sitharaman puts it at 3.8% of GDP [gross domestic product] against the target of 3.3%. However, she has justified this deviation in terms of the recommendation of the NK Singh committee on review of the Fiscal Responsibility and Budget Management [FRBM] Act [2003] which permits breach of the target in case of “far reaching structural reforms with unanticipated fiscal implications”. For 2020-21, the finance minister has provided for FD of 3.5% as against 3.0% as stipulated under the FRBM Act. Here...
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Category: Welfare schemes
Long on vision, short on means
The credibility of the fiscal consolidation glide path has been dented which is also reflected in the Sensex falling by over 1,000 points after the Budget announcements The Union Budget for 2020-21 presented to the Parliament by Finance Minister (FM) Nirmala Sitharaman on February 1 confirms apprehensions that the actual fiscal deficit (FD) for 2019-20 would exceed the Budget Estimate (BE) by a significant margin. Sitharaman puts it at 3.8 per cent of the GDP against the target of 3.3 per cent. However, she has justified this deviation in terms of the recommendation of the NK Singh Committee on review of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 which permits breach of the target in case of “far-reaching structural reforms...
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Reducing income inequalities – needs change of mindset
Almost every government irrespective of its political affiliation assigns top priority to accelerating economic growth [commonly understood as giving a push to gross domestic product (GDP)] believing that fruits of this acceleration will automatically percolate to the lowest strata of the society resulting in their higher income and better living standard. This belief has led successive regimes to single mindedly focus on growth without even bothering to look at income distribution. This task is left to economists for analysis more in the nature of a post mortem and mountain of research but is of little use in so far as learning lessons and changing policy discourse is concerned. One such piece of research is ‘Time to Care’ released by rights...
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Act, before it is too late
Taking a ‘fair’ and ‘realistic’ view of all receipts and expenditure of the Govt, its fiscal deficit is turning out to be almost double the three per cent target sought by the NK Singh panel Having achieved the fiscal deficit (FD) target for three years in a row, the Narendra Modi Government missed it in 2017-18 and 2018-19. During 2017-18, the actual FD expressed as a percentage of the Gross Domestic Product (GDP) was 3.5 per cent against the target of 3.2 per cent. For 2018-19, the then Finance Minister, Arun Jaitley had set a target of 3.3 per cent as against three per cent sought by a committee under NK Singh, former Expenditure Secretary and current Chairman of the 15th Finance...
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Poll promises mock at fiscal discipline
Delivering a lecture at the Foundation for Democratic Reforms, Bharat Institute of Public Policy and Hyderabad University on January 9, 2020,Vice President and Rajya Sabha Chairman Venkaiah Naidu stressed the need for a law to check “reckless and unsustainable populist” promises of political parties – on the lines of the Fiscal Responsibility and Budget Management Act [FRBM]. The FRBM Act was passed by the Parliament in 2003 for institutionalizing financial discipline and reducing the fiscal deficit [FD] to a manageable limit to improve the overall financial health. Under the Act – as amended vide the Finance Bill [2018-19], union government has set for itself fiscal deficit [FD] target of 3% of gross domestic product [GDP] for 2020-21 and debt limit...
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Impending fiscal catastrophe – act before it is too late
Having achieved the fiscal deficit target for three years in a row viz. 2014-15/2015-16/2016-17, Modi – government missed it in the following two years 2017-18 and 2018-19. During 2017-18, the actual FD expressed as percentage of gross domestic product [GDP] was 3.5% against the target of 3.2%. For 2018-19, the then finance minister, Arun Jaitely Jaitely had set a target of 3.3% as against 3% sought by a committee under Mr NK Singh, former expenditure secretary and currently, Chairman, 15th Finance Commission. The committee was set up in 2016 to review Fiscal Responsibility and Budget Management [FRBM] Act [2003] with a mandate to revamp the Act and recommend a glide path for the next six years. It recommended fiscal deficit [FD]...
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The dawn of a new era
Slowly but surely, India has manoeuvred its way through digital transformation. It must build on this success and the communication revolution to a new level for the creation of a vibrant economy Having missed the first and second industrial revolution of the 19th and early 20th century (courtesy the subjugation of India to colonial rulers of those times) and even the third technology-driven revolution (this one was primarily due to the “protectionist” and “inward-looking” Government policies, which were not conducive to embracing technology), India is at the forefront of leading the fourth industrial revolution — a digitally driven one —with speed and scale. The digital revolution calls for a shift from mechanical and analogue electronic technology to digital electronics, which...
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Digital Revolution – challenges and way forward
Having missed the first and second industrial revolution of 19th century and early 20th century respectively [courtesy subjugation of India to colonial rulers of those times] and even the third technology-driven revolution [this one was primarily due to the ‘protectionist’ and ‘inward looking’ policies which were not conducive to embracing technology], India is now in the forefront of the fourth industrial revolution – a digitally driven. The digital revolution is the shift from mechanical and analogue electronic technology to digital electronics which began anywhere from the late 50s to the late 1970s with the adoption and proliferation of digital-computers and digital record keeping that continues to the present day. The last five years have seen massive proliferation of affordable mobile...
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A scandalous waste
Successive Governments have reiterated their unflinching commitment to rationalise subsidies and reduce the unsustainable burden they put on the country’s Budget, yet they have failed to do so Millions of people (including many undeserving ones) are getting a variety of subsidies from the Central Government and States. These cost crores, impairing the ability of the Centre and States to rein in fiscal deficit (excess of total expenditure over total revenue) within the range mandated under the Fiscal Responsibility and Budget Management (FRBM) Act. These subsidies are administered in an “ad-hoc” and “arbitrary” manner and this leads to misallocation of resources, promotes inefficiency in production, distribution and use, encourages misuse and diversion of funds and makes way for controls. Successive Governments,...
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Why subsidy reforms are not taking off
At present, tens of millions persons [including undeserving] are getting a variety of subsidies from the government. These cost hundreds of thousand crore seriously impairing its ability to maintain fiscal deficit [excess of total expenditure over total revenue] within the target range mandated by the Fiscal Responsibility and Budget Management [FRBM] Act. The manner of administering these subsidies is marked by ‘ad-hocism’ and ‘arbitrariness’. It leads to mis-allocation of resources, promotes inefficiency in production, distribution and use, encourages misuse of funds, makes way for controls through the backdoor, enables bureaucrats to meddle in the affairs of the industry and creates fertile ground for nepotism and corruption. Even as Modi – government has vowed to make India a US$ 5 trillion...
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