Beyond Budgetary Sums

For all the excitement and hype extending over weeks and months and actively encouraged by the finance minister himself, the NDA government’s budget for 2000-2001, now that it has been presented, has shown once again how, in the larger scheme of management of the economy, the role of the central government’s annual budget is vastly exaggerated. The focus of attention, and criticism, in comments on the budget has been the finance minister’s failure to contain the government’s fiscal deficit. For this the minister, with his talk of how he was going to bite the bullet and not shrink from harsh decisions, has only himself to thank.

The fiscal deficit in the current year, 1999-2000, has turned out to be Rs 1,08,898 crore, exceeding by Rs 28,943 crore or over 36 per cent the finance minister’s target for the year. As a proportion of GDP the fiscal deficit in 1999-2000 is now estimated at 5.6 per cent compared to the budgetary expectation of 4 per cent. Chastened no doubt by this experience, the finance minister has settled for a conspicuously modest reduction of the fiscal deficit to 5.1 per cent of GDP in the budget for the coming year. What these numbers mean is that in regard to the mismatch between the government’s revenue and expenditure we are more or less back to the position at the height of the economic crisis at the beginning of the decade. Taking the centre and the states together, governments’ reliance on borrowings is almost 10 per cent of GDP this year and is likely to hover around the same level in 2000-2001.