Pranab Mukherjee,after 25 years,yet again announced our Interim Union Budget this morning….It was a fairly drab speech and clearly as general elections are fast approaching he lacked the mandate to announce big ticket reforms…..Nevertheless I was searching for some economic stimulus or some forward thinking on challenging issues…I was dissappointed….Our Political and Bureaucratic leaders simply lack that quality of leadership and vision to take us forward
Below is the Union Budget at a Glance…as was the fear,the revised estimates for the Fiscal Deficit in the Current ongoing year FY 09 has simply flown out of the Window…At Rs 326515 crs (US $ 67 Billion) It’s 6% of the GDP,against an earlier estimate of a controlled Rs 133287 crs (US $ 27 Billion) or 2.5% of GDP…that’s around 145% over earlier estimates…this is because of Oil surging to a high US $ 147/barrel in August 2008 from levels of below US $ 70 earlier in 2008…India Imports over 100 Million Tonnes of Crude Oil every year and the depreciating Rupee (20% in 2008) compounded the problem
But what really worries me is that the Estimates given for FY 10 show that despite Oil dropping to lows of US $ 40/barrel now,in absolute terms the Fiscal Deficit is shown as Rs 332835 crs (US % 68 Billion) and still high at 5.5% of the estimated GDP
This Fiscal Deficit is a Hungry Pig,eating away our resources…no amount of Lipstick is going to make a Pig attractive !…and though we say,sweat like a Pig,Pigs don’t actually sweat !…but we do ! when we look at this Pig of a Rising Fiscal Deficit !
This led me to questioning why ? was it because of escalating Non Plan Expenditure ?…Yes…but which Component ?…Defence,Interest Payments or Other Revenue Expenditure of Subsidies (Fertiliser,Fuel and Food)…..Interesting Revelations followed that throw up a few questions
Despite Borrowings shooting up by nearly 145 % from earlier estimates of Rs 133287 crs in FY 09 to Rs 326512 crs,why has Interest Payments shot up merely by less than 1 % to Rs 192694 crs from Rs 190807 crs ?
Borrowings as a % of Total Receipts has shot up to 36.24% against earlier estimates of just 17.75% in FY 09…Even in Estimates for FY 10 the Percentage stays a High of 34.92% …What are the Implications ?
If Interest Payments have not gone up then what component of Non Plan Expenditure has gone up ?…as Non Plan Expenditure shows a surge of 21.77 % in FY 09 Estimates from earlier Rs 507498 crs to the revised Rs 617996 crs
We know Borrowings have surged but specifically how has this increase of 145% in Fiscal Deficit revised estimate for FY 09 been financed ?
The brutal fact is that India has played into the hands of Oil Speculators in 2008…Oil Companies are carrying huge Inventory losses as they had booked Oil at high prices over US $ 100 for long term contracts….The Government and the Corporate Sector simply did not read the Oil Price Rice Bubble Scenario…India is paying a heavy price for this…It’s Rupee has weakened 20% against the US $ in 2008 as a direct consequence…Ironic really as the US $ itself is facing challenging times with USA grappling it’s worse financial and recession crisis in a hundred years