Dinesh Kamath's Editorial 'Fiscal deficit is a problem' that was published in Newsband

Fiscal deficit is a problem

The Centre’s fiscal deficit has overshot the full year’s budget estimate by as much as ₹92,349 crore. The deficit in the revised estimates for 2017-18 was 3.5% of GDP, wider than the 3.2% originally targeted. Worryingly growth-inducing capital spending is set on an underwhelming trajectory.

If there is a silver lining on the revenue front, it is the buoyancy seen in non-tax revenue, which surged more than 31%, putting the government comfortably on track to meet the budget estimate for a 3.9% increase. With the general election only a few months away, the government needs to avoid the temptation to open the spigot with an eye on the political benefits that it may see accruing.

The bigger challenge remains in finding ways to rustle up the requisite revenue to keep the deficit from slipping for a second year running. As the Reserve Bank never tires of cautioning, the onus is on the government to avoid further fiscal slippage as it could hurt the economy by crowding out vital private investment. This at a time when it has just been showing signs of a revival.

Pedestrian economic policies cannot take a nation forward. The fiscal deficit is a symptom of what went wrong. The nation needs rational scientific based economic policies. We had /have either a dynastic scions as leaders or now as the Hindu RSSvadis and caste and regional leaders dictating the terms. Our politics need a total break from its past and take an almost different direction and the leaders should not belong to the old club.

Whichever is the government at the centre fritter away huge amounts on irrelevant schemes, as if Public money were the property of the Party in power. All aspects of both Micro and Macro Economics are seen to be slipping away from proper control. The increase in the potentials for revenue growth is promising to check up the slippage in the fiscal deficit to higher number.The nearing election boom on expenditure will speak different story and tightening the belt on reducing the fiscal slippage is the order.

The trend of growth of tax revenue points to an economy that is sluggish. Apart from what this means for the fiscal deficit, that also has a bearing on the incumbent’s reelection prospects. After the general election, the government would feel the need to comprehensively review the country’s fiscal position. The states are as much stressed as the Centre. A combined fiscal deficit of 6.6% is preempting a lot of resources from productive private investment.