The National Democratic Alliance government has been careful so far about fiscal responsibility. In spite of some slippage in the last Union Budget, it has reaffirmed throughout its tenure its commitment to the path of fiscal consolidation. This is an important achievement of the government and it should not allow populist or electoral pressures in its final months to tarnish that record. Given the continuing necessity to ensure that private investment recovers in India in order to ensure a broad and sustainable foundation for high growth, fiscal responsibility is a must so that the public sector’s borrowing does not crowd out other, more productive, destinations of capital. However, it is better to clearly announce fiscal slippage than to conceal it behind sleight-of-hand and off-Budget items. The Comptroller and Auditor General, in a report tabled in Parliament earlier this month, accused the government of shifting expenses that were earlier part of the Budget process to other, off-Budget items including the borrowing of public sector enterprises. For example, support for state-run airline Air India was not being carried out through budgetary support as previously but through dipping into the Small Savings Fund. It should be clear that any attempts to massage the headline fiscal deficit number will eventually be seen through. The credibility of India’s fiscal arithmetic is more important than appearing to meet a fiscal consolidation target that is actually being missed. The Budget numbers should not imply fiscal distortions, but should present a clear and transparent picture of the real state of affairs.
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First Published: Tue, January 29 2019. 23:43 IST