Report Card on India's Fiscal Health (Sum's take)

Though I am no where close to being an economist still reading business dailies, and keeping myself abreast of my health and India's health there are certainly some fiscal slippages of a government which is living beyond its means.

1. High fiscal deficit. India's gross fiscal deficit is already one of highest in the world and its getting bigger and bigger. The biggest reasons being S.U.B.S.I.D.I.E.S. (oild, fertilizer etc etc), babus sixth pay commission (its a different matter the jawans and III and IV category employees still gets peanuts), higer wages, farm loan waiver (increased later on the insistence of Rahul baba) and significant duty and excise cuts on account of reigning in inflation. High fiscal deficit will increase borrowing and keep interest rates high.

2. PC and his successors will be forced to reduce public borrowing and curb public investments to keep fiscal deficit within manageable limits. Curbing public investment will have an adverse effect on a boyant economy where infrastructure in lacking and need big thrust by public investment from the government.

3. The amount spent on account of oil and fetilizer subsidy is not meeting the desired objective of helping the poor by keeping the prices low. Rather the benefit of oil subsidy is enjoyed by the lower and higer strata and fertilizer subsidy has in no way reduced farmer suicides or curbed inequalities in the farming sector. The subsidies if reduced the amount can be spent on improving the education, medical and social infrastructure and channelised for generating employment opportunities for the poor which will help India grow much more rapidly. Imagine India's growth story if poor get the purchasing power. The composition of spending is undesirbale. There are certain transfers meant for the lower strata misused and enjoyed by the higher starata.

4. High fiscal deficit has left no room for any maneauverability with the Government on acoount of sudden and uncertain events like oil and commodity price rise. The cushion is just not available anymore.

Given the large negative consequences for the economy the Government must restraint spending pressures and reign in the deficit, without which the hard earned gains of revent years - low government borrowing, disciplined spending, lower interest rates will be lost. Its time for FM and PM to act and bring a successor to Fiscal Responsibility and Budget Management Act.