Fears of a political backlash from opposition and rating agencies downgrade of India seems to prompted finance minister P Chidambaram to opt for several accounting sleight of hand to control the country's fiscal deficit for the current financial year in his interim budget.
Bringing down fiscal deficit to 4.6% from earlier projection of 4.8% has seen cuts in defence spend, carrying forward this year's liability to next year and silence on allocations for welfare schemes.
Economists claim on many counts Chidambaram has gone beyond the general practice of curtailing the Plan expenditure to contain the fiscal deficit.
Carrying forward liabilities from this fiscal to the next, denting the defence expenditure, and silently merging government's welfare schemes and not disclosing the fate of the allocation made to the merged schemes form the major part of accounting sleight of hands by Chidambaram, as per experts.
The jugglery has yielded desired results and may silence the global rating agencies and the opposition parties. However, it would also skew the fiscal position of the government.
Explaining the math, Bibek Debroy, economist and professor at Centre for Policy Research, told dna, "Two things that have been done by Chidambaram which are strictly not ethical is booking the expenditure of last quarter of the current financial year to the first quarter of the next fiscal. Secondly, liabilities to oil companies have also been postponed to the next fiscal." About Rs 35,000 crore payable to the oil marketing companies have been carried forward but the actual payment may come around Rs 65,000 crore, said finance ministry sources. That's a massive figure to save the dent on the deficit.
Sharing his perspective, former finance minister Yashwant Sinha told dna, "P Chidambaram has only tried to take the parliament on a ride in his interim budget. He has milked the public sector units. The disinvestments have been done only through PSU transfer. And they have not still given the tax refunds, thereby saving on funds."
Sources said the revised estimate of the defence expenditure in the last three years is almost half the total planned for the years.
Debroy also said the budget is silent on the allocations made to welfare schemes that were merged. "The government cut down the number of welfare schemes and merged them. But we do not know what happened to the allocations that were made for the 130 schemes that got merged. There is no mention of it. Also, the interim budget has under-provided the expenditure and overestimated the revenues."
From the targeted Rs 16,65,297 crore on the total receipts front, the government is expected to get Rs 15,90,434 crore in this financial year. For the next fiscal, the interim budget pegs total receipts at Rs 17,63,214 crore. And from the Plan expenditure of Rs 5,55,322 crore for 2013-14, Chidambaram has cut the allocations to Rs 4,75,532 crore. And he has explanation for both. For the revenue that has not accrued to the government, Chidambaram argued, "The money is with the people of the country. And they will spend it." And he has dubbed the cut on the Plan Expenditure as 'savings' for the government, while actually it is curtailing allocation on the welfare schemes.
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