TOUGH GOING FOR COMMON MAN

                                                        - MILAN K SINHA

With fresh snow fall and rain in northern part of the country including national capital, the cold weather prolonged its stay for some more days amid plethora of dampening news of Indian Economy too suffering from cold with no signs of fast recovery at least during the current fiscal despite certain monetary and fiscal measures taken by RBI and the central government.  Revision and re- revision of estimated Gross Domestic Product (GDP), Fiscal Deficit (FD), Current Account Deficit (CAD) and other economic and financial indices have been  worked out as a desperate attempt to make the figures look not that bad to affect the electoral prospects of UPA partners in the ensuing 16th general election. The presentation of vote of account (interim budget) for FY14-15 in Lok Sabha on 17th Feb'14 is seen as part of that political exercise of ruling coalition at the Centre.

However, while presenting the interim budget of 2014-15 the Union Finance Minister said, 'Let me begin with the good news. The fiscal deficit for 2013-14 will be contained at 4.6 per cent of GDP, well below the red line that I had drawn last year. More importantly, the Current Account Deficit, that threatened to exceed last year’s CAD of USD 88 billion, will be contained at USD 45 billion, and I am happy to inform the House that we expect to add about USD 15 billion to the foreign exchange reserves by the end of the financial year.'

The fiscal deficit, which is the gap between expenditure and revenue, was 4.9 per cent of GDP in 2012-13. Experts are of the opinion that the fiscal deficit could be restricted to 4.6% mainly by shrinking expenditure and higher-than-expected realization from the auctioning 2G radio spectrum. It is notable that plan expenditure was also reduced by 14.37%. Moreover, to achieve its fiscal deficit target the government resorted to accounting tactics  for covering up ballooning subsidy bill by rolling over fuel subsidy worth Rs.35,000 crore to the next fiscal, while remaining silent on the roll-over figures for food and fertilizer subsidies. The question is – why to adopt short cuts to paint and project a bright picture?

So far containing India’s Current Account deficit (CAD) at the level of $45 billion this fiscal - a reduction of $33 billion from the record high level of 2012-13, is concerned,   both the finance ministry as well as the RBI (Reserve Bank of India) did all to curtail gold imports - one of the major reasons for the record CAD in financial year 2012-13. In fact, the customs duty on gold was increased by 10% in not less than three doses by the central government in current financial year and RBI on its part imposed a series of curbs on inward shipments of gold. The question is – who had allowed gold imports so thoughtlessly which impacted CAD so badly? 

Interestingly, a deeper look at government’s balance sheet reveals that as high as 37% of government revenue goes to service interest on borrowings. It is also estimated that a major chunk of our borrowings in 2014-15 will be cornered for payment of interest on total borrowings. The simple question is – are we heading towards a situation of ‘Debt Trap’? 

From the common man's perspective, even though both the government and the RBI claim to have acted in tandem to bring down price rise, yet the food inflation is at 8.8% - a major cause of concern. FM admitted this by saying, “While our efforts have not been in vain, there is still some distance to go. Food inflation still remains a worry."

So, going by the major economic data mentioned herein above coupled with political indecisiveness at the apex level even on economic issues concerning the general well-being of millions of common people, it is but natural for the citizens of the country to be highly apprehensive of further escalation in prices of essential commodities at least during next few months till new government assumes power at the Centre and then takes some concrete measures on this count.

It being so, the Indian economy is destined to be in bad weather for some time more, the  implication of which, we know well, is and would be fatal as far as job creation, implementation of welfare schemes, external debt & interest servicing, investment prospects, price rise etc. are concerned.

The bigger question now is - can a country having huge human as well as natural resources (with world's largest youth force) allow it to happen like this anymore or should it stand up not only to compel the policy makers and political class to act decisively at all levels to ensure robust and inclusive economic growth in coming years but also to identify and punish suitably all those political and administrative bigwigs who have been responsible and accountable for this sordid state of economy. 

As always, I am keen to know what you think on this subject. Hence, request you to post Comments to share your views and experiences.

                Will meet again with Open Mind. All the Best.

# Do visit my site : milanksinha.com