StatsGuru: 24-December-2012

The second of three instalments of StatsGuru that examine the big challenges India faces going into 2013 considers the problems with India’s public finances. As Table 1 shows, the essential problem is that fiscal deficits, for the states but particularly for the Centre, are far too high as a proportion of gross domestic product. They went up at the time of the financial crisis of 2008 — partly for reasons unrelated to the crisis – but have stayed stubbornly high. Nor will the dip Table 1 predicts for 2012-13 likely materialise, as the Budget projections are optimistic.

How has this happened? Table 2 shows that revenue expenditure has increased as a percentage of GDP since 2008-09. Major chunks – defence expenditure and interest payments, for example, have remained static, however. And while social-sector expenditure is often blamed, it was not responsible for the jump in 2008-09, as Table 3 shows. It increased as a proportion of spending only later. The real problem, as Table 4 elucidates, is the subsidy bill, which did indeed jump in 2008-09 and has stubbornly refused to come down – again, the Budget projections for 2012-13 should be viewed cynically.

 

What of government debt? As Table 5 shows, that’s actually decreased, indicating the deficit is not hampering efforts to cut down. However, some states aren’t performing as well. Table 6 lists high-debt states – West Bengal stands out as a problem. West Bengal also has a deficit problem, as Table 7 shows. Kerala, although it is not one of the highest-debt states, is running large fiscal deficits, which may become a problem down the road. Overall, however, the states have contributed hugely to reducing the public debt burden, as Table 8 explains.(Click here for tables)