July 08, 2019

Budget and the Elephant in the Room

In this New Indian Express article, Shankkar Aiyar examines the new budget and the need for efficient government expenditure to meet the goal of $5-trillion GDP for India. 


He addresses the gap between expenditure and revenue of the government and the need for expenditure management. 


"The elephant in the room is the size of the government and expenditure management. This financial year the government will spend Rs 7,633 crore a day. It will earn Rs 5,705 crore per day — including disinvestment proceeds which are effectively circular trading of public assets (Peter Buys PSU, Pays Paul to Plug Deficit bit.ly/27PSUs). To bridge the gap between expenditure and income, the government will borrow Rs 1,928 crore per day or roughly Rs 80 crore per hour. Topping the expenditure budget is interest payments—Rs 1,809 crore a day. "


He further analyses the implications of sustaining growth with nearly a third of its revenue deployed towards interest payments. 


"Finance Minister Nirmala Sitharaman quoted the eloquent Pisirandaiyaar’s advice to King Pandian, that a few mounds of rice harvested from a small piece of land would be sufficient for an elephant, and asked, “but what if the elephant itself enters the field and starts eating?” The fact is the elephant called the government is doing exactly that. Success in attaining the goal of a $5-trillion GDP by 2024 rests on the efficiency of government spending. The bard’s advice on taxation merits application on expenditure too."


Read the complete article here

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