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Our Bureau

Chennai, Aug. 24 The Government is impounding about 48 per cent of the funds of the public sector banks – over Rs 150,000 crore – to finance the budget deficit “thereby starving the private sector of resources”, said Dr Subramanian Swamy.

Speaking at a seminar, ‘An Economist’s Perception of Governance’, organised here by the Study Circle of the Committee of Management of Chartered Accountants of India, Dr Swamy noted that surplus in the capital account of the budget was financing the revenue deficit, which he called “most anti-developmental and extremely bad governance”.

He also noted that the accumulated debt of the Centre and States was so large – 86 per cent of GDP – that the annual amortisation serving outlay, or interest payments, now exceeds fresh loans taken.

Fresh loans received, Rs 133,287 crore, were less than interest payments for the coming year by Rs 57,632 crore, Dr Swamy noted. “This situation is unsustainable and can explode into a financial crisis as it did in Indonesia and South Korea in 1997,” he said.

Describing the Indian economy as “outwardly healthy but internally sick”, Dr Swamy said, “Due to the folly of all finance ministers since 1996, nearly 98 per cent of the receipts of the budget revenue are committed to heads of expenditure that cannot be politically pruned – defence, subsidies, interest payments, counter-guarantees, pension, police and grants to States.”

He said that there was no accountability in governance. For example, though SEBI has made compliance with the corporate governance guidelines mandatory for listed companies, 1,213 listed companies have not complied with the guidelines as of March 31, 2008.

“Yet, there has been no action by SEBI. Why?” Dr Swamy asked.

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