FM tells Fairy Tales – Ravi Shanker Kapoor

Our politicians believe that our credulity is limitless―just like their own unscrupulousness. So, they keep telling us fairy tales―and hope that we would believe in these. Finance Minister P. Chidambaram has even given a timeframe for replenishing the public exchequer. According to his statement on Fiscal Roadmap and Consolidation, the fiscal deficit will (miraculously) come down to 3 per cent in 2016-17 from the 5.1 per cent (Budget 2012-12 projection).

If wishes were horses, our politicians would make an excellent cavalry. But, unfortunately, that is not so; what matters in public finance is not the exquisiteness of vision but the tyranny of numbers. Chidambaram reiterates the Congress-led United Progressive Alliance’s (UPA’s) commitment to “the flagship programmes designed to help the poor and bring about inclusive development,” but these require money, and it is here that his government’s slip shows.

The UPA regime is hell-bent on initiating entitlement schemes requiring huge funds and expanding the scope of the already existing ones. The food security legislation is waiting to take off; then there is talk about health programmes. The National Advisory Council (NAC), the circus surrounding Congress president Sonia Gandhi, keeps conjuring up entitlements.

Worse, NAC fanatics are also involved in activities which are inimical to growth and development; this, apart from adversely affecting tax receipts, also perpetuates poverty and backwardness. Against this backdrop, it is only a miracle that can bring down the fiscal deficit to 3 per cent in five years.

Like other personages of the ruling coalition, the finance minister blames extraneous factors for our economic problems: “In 2011-12, the slowdown in the world economy, lower growth in India, higher inflation, lower tax receipts and increased expenditure (including subsidies) led to considerable fiscal stress.” Not a word about the mischief of the NAC. Which is not surprising, as its members, being the confidantes of She-who-must-be-obeyed, have to be tolerated and not criticized.

This helplessness leaves very little room for the person in-charge of the country’s exchequer. He can’t really act; he has to make others believe that he is acting. So, he appoints Vijay Kelkar, a former finance secretary. Kelkar, a typical technocrat, tells the government what it already knew. It was a doctor asking another how to reduce weight; the answer is obvious: curtail the intake of calories, especially fat and carbohydrates; exercise regularly; give up, or reduce, drinking; and so on. The real thing challenge lies in doing all this.

As a ritual, Chidambaram set up a panel; another ritual was the submission and acceptance of the Kelkar report; and it has been followed by yet another ritual―of announcing a roadmap. As spirituality and quest of the infinite is lost in religious rites, fiscal prudence has got buried in populist slogans and customary ceremonies.

“The Kelkar Committee has cautioned us that a business-as-usual scenario for the current year may lead to the fiscal deficit rising to 6.1 per cent of GDP,” the finance minister said in his statement. “This would have grave consequences for the economy is, therefore, totally unacceptable. The committee has recommended a number of reform measures in taxation, disinvestment and expenditure. On the taxation side, the committee has strongly advocated a transition to the Goods and Services Tax (GST) and a quick review of the Direct Taxes Code (DTC) before its introduction and passing in Parliament.”

But what’s new in these, Mr. Minister? Haven’t so many reports said the same thing earlier?

Chidambaram also says that the panel recommended “a number of new models for disinvestment.” What could that be? Privatization? But the official disinvestment policy is: “While pursuing disinvestment, Government has to retain majority shareholding, i.e. at least 51% and management control of the Public Sector Undertakings.” With sale of public sector undertakings officially ruled out, what new models the government could be referring to?

The most important question that Chidambaram needs to answer is this: how serious is he about the roadmap? He may like us to forget but there was something called the Fiscal Responsibility and Budget Management Act (FRBMA), 2003. Aimed at eliminating revenue deficit and bringing down the fiscal deficit to 3 per cent by March 31, 2008, the legislation was killed by the spendthrift ways of the UPA regime. Interestingly, it was Chidambaram who pressed the pause button on the FRBMA in 2005. So much for fiscal prudence.

And now he expects us to believe that he would ensure that the fiscal deficit would be brought down to 3 per cent in the next five years. We have to be downright gullible to believe him.

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