Oh, for some rectitude

39. Oh, for some
    rectitude

You can’t spend more without
higher revenues. ‘Calculated risks’ is a euphemism for fiscal brinkmanship

“There has been an unsustainable increase in
Government expenditure. Budgetary subsidies, with questionable social and
economic impact, have been allowed to grow to an alarming extent. The tax
system still has many loopholes. The crisis of the fiscal system is a cause
for serious concern. The fiscal deficit of the Central Government, which
measures the difference between revenue receipts and total expenditure, is
estimated at more than 8% of GDP in 1990-91, as compared with 6% at the
beginning of the 1980s and 4% in the mid-1970s. This fiscal deficit had to be
met by borrowing. The burden of servicing this debt has now become onerous.
Interest payments alone are about 4% of GDP and constitute almost 20% of the
total expenditure of the Central Government.

Without decisive action now, the situation will
move beyond the possibility of corrective action. There is no time to lose.
Neither the Government nor the economy can live beyond its means, year after
year. The room for manoeuvre, to live on borrowed money or time, does not
exist anymore.”
— From the first budget speech of Manmohan Singh, 24 July 1991.

Today interest payments account for Rs.2,25,511
crore; defence Rs.1,41,703 crore; and subsidies Rs.1,11,276 crore. These three
alone siphon off 78% of Centre’s net revenue. None build infrastructure.
(Note : The above analysis remains valid even today. Our fiscal
situation is much worse than in 1991. Have we learnt any lessons in last 18
years ? Where are the remedial measures ?)

(Source : Businessworld Magazine, 3-8-2009)