The Hindu Business Line : Another sleight of hand

It is all hot air and empty talk - about the fiscal strength of the economy, and all that. The latest sleight of hand, as far as accommodating the outgo on account of the Sixth Pay Commission recommendations is concerned, confirms the worst fears of the nation, namely, that not only is money being squandered on heads which will not add to the productive capacity of the economy but that a fiscal crisis of gargantuan proportions is being built up, which will have to be tackled by the citizens of tomorrow.

Briefly, the 2008-09 Budget papers indicate that a fiscal deficit of Rs 1,33,287 crore has been projected for the year, which does not take into account the Rs 60,000 crore loan waiver for farmers (which may now go up further in view of the suggestions made by important Congress personages).

FISCAL DEFICIT CUSHION

This deficit-level comfortably meets the Fiscal Responsibility and Budget Management Act stipulation of an annual reduction in the fiscal deficit by at least 0.3 percentage points and, for the revenue deficit, by 0.5 percentage points. In fact, too comfortably one thought because the Act also stipulates that the fiscal deficit should be within 3 per cent of GDP by the end of March 2009, the Budget projection being 2.5 per cent.

In terms of the FRBM Act and the GDP projections for 2008-09 (Rs 53,03,770 crore at current prices), the Government therefore has around Rs 26,000 crore as a cushion for the fiscal deficit. Back of the envelope calculations indicate that, provided the arrears since January 2006 are paid in two annual instalments, this amount will be more than enough to cover the additional outgo during 2008-09 on account of the pay increase.

This is all very fine - making the figures tally at the end of the day, in a manner of speaking. But why keep it away from the nation when making the Budget speech? Indeed, in paragraph 110 of the speech, the Finance Minister merely stated: "I have been informed that the Sixth Central Pay Commission will submit its report by March 31, 2008. I am confident that the report will meet the legitimate expectations of Government employees."

Perhaps, this is all that the Finance Minister could have done at the time of the Budget's presentation because the announcement of the recommendations had not yet been made.

But of course everyone, including the Minister concerned, knew what the Budget implications of the recommendations would be, which is why the fiscal accommodation for the liability has been quietly made in the FRBMgoverned fiscal deficit figures for 2008-09.

This apart, coming on top of the farm loan waiver, any specific inclusion of figures on the Pay Commission in the Budget document would have given the game away even more transparently (than has in fact been the case), namely, that the UPA Government's 2008-09 Budget is nothing more than the election manifesto of the Congress party for the next Lok Sabha polls.

IN `NATIONAL INTEREST'

Like the farm loan waiver, the longpending increase in the salaries of the over-four-million-strong Central Government bureaucracy is probably also in the "national interest", since without the bureaucracy all official work, being conducted expeditiously now, would have ground to a halt. As with the loan waiver, no one disagrees with this. After all, no one is making the point that it is also in the "national interest" that the Congress party should return to power after the next election.

Incidentally, one wonders whatever happened in Washington between the External Affairs Minister and the US Administration, particularly on the nuclear deal. It is, of course, sheer coincidence that the Pay Commission news bombshell has effectively pushed all reports about the visit to the sidelines.

RANABIR RAY CHOUDHURY

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