The Hindu Business Line : Sermons in stones, and good in everything?

ON the Budget site www.indiabudget.nic.in, an innocuous looking option reads `The Statement under Section 7 of the FRBM Act.' Click it and you'll read the explanation for "deviations in meeting the obligations of the Government under the Fiscal Responsibility and Budget Management Act, 2003." Perhaps, we're too used to deviations, so this important document has not attracted as much attention as Goa and Bihar, Shibu and Munda.

FRBM has clamped an obligation on the Government to rein in deficits. However, "The Budget Estimates 2005-06 do not comply with the stipulations regarding minimum annual reductions in the revenue deficit and the fiscal deficit prescribed in the Rules framed under the Act," the Finance Minister concedes. Then come the explanations, which to some, may read like excuses, despite the FM reaffirming his commitment to eliminate revenue deficit by 2008-09.

So, pushing aside the platitudes such as that the fiscal drag "continues to hold back full achievement of potential economic growth", and that prudent fiscal policy "requires raising non-debt resources commensurate with the aspirations for higher levels of public expenditure on social and physical infrastructure," let us look at the `difficulties'. Such as: "Time taken in the passage of the Finance Bill, the cumulative impact of the post-budget duty concessions given to ease the impact of inflation on the Aam Aadmi, increase in fertiliser subsidy, additional funds for rural telephone network and tsunami relief."

Another para adds a few more problems: Rise in crude prices, surge in liquidity due to continuing inflow of foreign exchange, rising consumption demands, reduction of taxes and duties on petroleum products and construction materials, and inadequate rainfall affecting Kharif output. Low throughput in Parliament is not mentioned as an obstacle; nor does the preoccupation of the Centre with State politics and number engineering, rather than country's good appear to be in anyway impacting fiscal woes.

Chidambaram is generous about giveaways in the wake of the Twelfth Finance Commission (TFC) award, "in keeping with the high traditions" and "in the spirit of cooperative federalism". But there are some disturbing small numbers about macro things, like the household ant in the elephant's ear. TFC suggestions "will lead to deterioration of about 0.75 per cent of GDP," and that's in addition to the 1 per cent knock that `our potential economic growth' took because of oil prices.

The provision of Rs 5,000 crore "as compensation to States on account of the shortfall in revenue that may arise due to the implementation of State Level Value Added Tax w.e.f. April 1, 2005," has all the trappings of symbolic gesture, unless the North Block is once again hoping that the VAT spaceship may not take off this time too. For instance,

Tamil Nadu has been saying that the State would stand to lose about Rs 2,700 crore, and the loss estimated by Karnataka is in the region of Rs 1,500 crore.

Much of bad news is going to spill over next year too, and you can find the FM throwing up his hands again to say, "Therefore, it is not feasible for the Central Government to achieve the minimum annual deficit reduction as envisaged under the FRBM Act." He claims to be resisting the temptation of "enhanced taxation" lest the `proverbial goose' gets killed.

But the new taxes in the latest Budget seem to go against such assertion. To compound our fiscal worries, the Minister is betting on "liquidation of tax arrears" for increasing revenue. Ominously numbered para 13 of the statement is about a dog's tail, that is, expenditure control. Does it not sound like daydream that the FM "calls for revamping public expenditure management and for accounting reforms"?

What I like best is a Duke Senior-in-the-forest-of-Arden line that Chidambaram quotes at the end: "Sweet are the uses of adversity." Thus, he pleads for time, a gestation period, and an allowance to reclaim ground lost. Before you nod, manage to grab some quick notes on www.gradesaver.com about this pick from Shakespeare's As You Like It.

The Duke describes his men as being able to, "Find tongues in trees, books in the running brooks, / Sermons in stones, and good in everything". But like most of us, Oliver's version of the forest has "snakes and lions" even as "he himself becomes long-haired and wild looking". Moral: "Arden appears differently to everyone in it depending on their personalities."

So, what do you see in the forest of FRBM statement?

E&OE@TheHindu.co.in

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