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Arun Shourie: Govt covering up

Excerpts from Arun Shourie's speech in Rajya Sabha on Interim Budget

Arun Shourie  |  New Delhi 

Arun Shourie

Having stated in the Budget, “Extraordinary economic circumstances merit extraordinary measures. Now is the time for such measures,” the government announced no measures.

The government is seeking to cover up the results of its gross mismanagement by invoking the international economic meltdown. The PM and FM have repeatedly stressed that not allocations but outcomes are important. On this test prescribed by them, the government fails woefully.

Mumbai to be made an International Financial Centre: PM pledged Rs. 1,000 crore. Total given: Rs. 16 crore 16 lakh

After devastating flood of July 2005, PM and Mrs Sonia Gandhi pledged Rs 1,260 crore for “rejuvenation” of the Mithi River. Not a paisa given.

Huge plan announced for reconstructing Dharavi: the slum remains as it was
Centre was to have financed Mumbai Metro: The Maharashtra government told it will have to manage on its own. As a result Phase I has slowed down. Not one bidder submitted a bid for the second Phase even though the last date was extended thrice

National Highways project: Completion date has fallen from 81 per cent in 2004/05 to around 50 per cent now. Recently bids were invited for 60 projects. For 43 of these, not one bidder came forward. Of 17 projects for which bids were received, for 6 only 1 bidder; in remaining cases, bidders have asked for much larger grants — up to 35 per cent — than was provided. Reasons for this: complete arbitrariness: the current chairman of the National Highways Authority of India (NHAI) is the fifth chairman in two years even though the United Progressive Alliance (UPA) government had decided that the minimum tenure of the chairman shall be two years! The government reversed earlier decision that the NHAI will award contracts; “government” awards contracts

Power: contrary to claims in Budget papers, at current rate only 40,000 megawatts will be added in 11th Plan instead of target of 90,700 megawatts. The gap between demand for and availability of power at end of the 11th Plan will be worse than at its commencement. T&D losses continue at 40 per cent. Fraudulent claims in regard to Rajiv Gandhi Gramin Vidyutikaran Yojana: Figures given in Budget documents wholly misleading

Rajiv Gandhi Water Mission: severe indictment by CAG
NREGA: shameful findings of the CAG. The ministry evades responsibility. The CAG nails evasion

Universal Service Obligation Fund: Accrual till March 2008: Rs 20,400 crore; utilised: Rs 6,300 crore. Balance fraudulently shown as “nil”. Comptroller and Auditor General (CAG) nails this.
Scam in grant of 2G licenses: The Central Vigilance Commissioner (CVC) and the Telecom Regulatory Authority of India’s observations
Continuing shifts in guidelines and policy on 3G licenses and spectrum allocation
Reform of Public Distribution System: No progress in spite of pledges in successive Budgets of this government. Similar failure in better targeting subsidies

Gross fiscal mismanagement: The fiscal deficit liable to be over 10.5 per cent of gross domestic product (GDP); of the Centre alone: 6.4 per cent of GDP. Not because of capital assets having been created. Because of unchecked, profligate current expenditure. Dangerous consequences: Average Fiscal Deficit in 1986-91 which triggered 1991 crisis was 7.7 per cent. Fiscal Responsibility and Budget Management required that the the fiscal deficit be reduced to 3 per cent of GDP by last year. It is 6.4 per cent of GDP.

This is not an Interim Budget. It is not even an Internment Budget. It is truly an Interment Budget.

Fiscal Responsibility and Budget Management required that the the fiscal deficit be reduced to 3 per cent of GDP by last year. It is 6.4 per cent of GDP. Revenue account was to have been in surplus by now. In fact, it is in deficit and the deficit is liable to exceed 5 per cent of GDP. The government guarantees were to be capped at 0.5 per cent of GDP. They will exceed 1.8 per cent of GDP

This was exactly what we had pointed out will happen: that the Budgets, particularly of 2008/09, were grossly underfunded

The deficit has absolutely nothing to do with a stimulus. On the contrary, it now leaves little headroom for providing the stimulus that is needed: this is recognised even by the prime minister’s own council of economic advisors

With the government borrowing two and a half times what was targeted; with the government borrowing of over Rs 3,60,000 crore unavoidable next year, the very sector on which the government is depending for not just implementing but financing infrastructure projects will be squeezed out of the market. The worst sufferers will be the Small and Medium Enterprises as the large corporates pre-empt funds.

This gross mismanagement of fiscal affairs is but a symptom of general economic mismanagement by this government. First it fed the bubble, and took credit for what all of us were warning was just a bubble. In fact, exactly as had been forecast by us, with reforms at a standstill, signs of a slowdown began to become evident by April last year. Soon, the international economic crisis also began to reach Indian shores. Instead of taking steps that were imperative, The Government went into denial. — “Our fundamentals are strong,” “India is decoupled,” “This is just casino capitalism.” As the downslide accelerated, it took inexplicable steps which pushed the system down farther, faster: P-notes were suddenly revived, short selling was allowed to continue, even naked short selling was allowed to proceed full swing.

That is the legacy that this government is leaving behind:
A slowing down economy
Job losses across the country
Finances of the government at a dangerous edge
Little headroom for measures that are necessary
Confidence of Indian investors broken
Confidence of the foreign investors in the word of the government of India broken
This is not an Interim Budget. It is not even an Internment Budget. It is truly an Interment Budget.

Excerpts from the speech of Rajya Sabha MP from the Bharatiya Janata Party Arun Shourie on the Interim Budget, 25 February, 2009

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First Published: Sun, March 01 2009. 00:12 IST