Ballooning subsidy and the great fudging behind it

sob

Mod
Joined
May 4, 2009
Messages
6,425
Likes
3,805
Country flag
With the report of the First Half, (H1) of the economy is due to be relaesd in early November, situation continues to be grim.

Almost 75% of the annual budgeted subsidy has been used in Q1 and Q2, and with elections round the corner there does not seem to be any hope on curtailing the subsidy balloon.

OTOH the Finance Minister has been repeating that the Deficit would not cross the 4.8% of GDP mark. He has called it the red line. But with all indicators are showing that FM has to do large scale cosmetic dressing up to meet his budgeted targets. Similar to last year the Government proposes to drastically cut down on expenses and to roll over part of the subsidy bill to the next year.

Reports are out in the media that the FM will be rolling over US $ 15 Billion of subsidy bill to he next financial year. In Rs. terms it is about Rs. 90,000 Crores. This will be putting an enormous strain on the new Government next year.

Exclusive – India eyes $15 billion rollover of subsidy costs into next budget | Firstpost

Finance Minister P. Chidambaram is finding it harder and harder to meet the government's budget promises and may sweep as much as $15 billion in subsidy costs into next year's accounts to ensure he hits fiscal targets ahead of national elections, ministry officials say. Chidambaram insists that the fiscal deficit target of 4.8 percent of GDP for the year to March 31, 2014, is a red line that will not be breached. The worst economic downturn since 1991 and a fall in the rupee to a record low have undermined budget assumptions for some months. But finance ministry officials said the window to raise domestic fuel prices sharply, which would cut subsidies, is closing with state and national elections drawing closer, so shifting some costs into the 2014/15 budget is inevitable.

The worst-case scenario as of now is that $15 billion in costs will have to be rolled over into next year's budget, the ministry officials said. This assumes that there will be no substantial increase in domestic fuel prices to offset the ballooning subsidies. By rolling over some costs, Chidambaram can tell voters in the run up to the elections, which must be held by May, that the government met its deficit target. But equally, he will be shackling the next government with costs that could blunt its ability to stimulate an economic recovery. "Whatever we need to do, we will do. But the fiscal deficit target will be met," said a finance ministry official. "No one should be in doubt about that."

Last year, Chidambaram narrowed the budget deficit by 1 percentage point to 4.9 percent of GDP by pushing nearly $15 billion in subsidy costs into this year's budget and cutting more than $16 billion in planned spending, two ministry officials said.
 

sob

Mod
Joined
May 4, 2009
Messages
6,425
Likes
3,805
Country flag
From the same article

India's accounting method "never gives you the real picture of your finances," said Devendra Kumar Pant, chief economist at India Ratings & Research.
This has been exploited to the full by our Hon President in his previous avatar as the Finance Minister of India.

But the biggest worry will be the cut in planned expenditure. Last year nearly US $ 16 Billion planned expenditure was cut by the Finance Ministry to meet the deficit targets and the a similar or larger figure may be repeated this year.

Now we now why the Govt. did not sign for the M 777 guns and why the MRCA deal is not being finalised.
 

Latest Replies

Global Defence

New threads

Articles

Top