Something about the budgetary figures dont add up.
Though the FM claims that the fiscal deficit this year will be 5% + as against 6%+ of last year, the truth is that this reduction is mainly because of the money received from the sale of 3G spectrum. This is a one time sale of family silver, and do not reflect a serious effort on the part of the Government to reduce deficit through financial prudence. If you take this amount away, the Fiscal deficit for the current year will be back to 6.2%. Since there is no 3 G spectrum sale money available next year, the projected 4.6% deficit target for the next fiscal appears to be a bit too optimistic. This is bad news for those who want inflation to be controlled.
Another notable point is the projected rise in Government expenditure at just 3%, as against 19% last year. This too tests the common wisdom. With Government spending considerably reduced, one should witness a slowing down of the economy. But the FM claims the GDP growth will be 9% next fiscal. Reduced spending and higher growth rate?? Tough to believe. And reduced spending is bad news for the unemployed.
We need to take some harsh steps to reduce the fiscal deficit as it is adversely affecting our Real GDP growth in a big way. We were hearing about reducing the Fiscal Deficit to 2% not long ago, but no one even dare mention it these days. The rot started about 5 years ago, when we should have curbed non-plan expenditure, but we missed the bus and are paying the price for it.
Reduced Government spending and increased GDP growth? It means only one thing - The growth is to be funded by Black Money. And that is bad news for inflation.
