Fiscal deficit pushing India towards a financial emergency, opines Roy

Sakal Times
Saturday, 3 February 2018

Roy said that the government machinery is borrowing too much money for its operations. Roy said, “Public sector companies (PSU) are sitting on a lot of reserves. The reserves with these PSUs have increased in recent years. This money needs to be used to facilitate the government and decrease borrowing. The spurt seen in financial numbers in the last four months is because of the purchase of government bonds. We have to grow up as an economy.”

Discussion on Union Budget was organised by the Pune International Centre

Pune: Speaking at a panel discussion organised by the Pune International Centre, Director of National Institute of Public Finance and Policy Rathin Roy said that the Indian economy may see a financial emergency in the next few years if the fiscal deficit situation is not corrected and controlled. He was one of the five experts invited to the panel discussion about the Union Budget for 2018-19, which was presented by Finance Minister Arun Jaitley on February 1.

Roy said that the government machinery is borrowing too much money for its operations. Roy said, “Public sector companies (PSU) are sitting on a lot of reserves. The reserves with these PSUs have increased in recent years. This money needs to be used to facilitate the government and decrease borrowing. The spurt seen in financial numbers in the last four months is because of the purchase of government bonds. We have to grow up as an economy.”

KS Hari, Assistant Professor at Gokhale Institute of Politics and Economics, said that a growth of four per cent can be expected as against the government claims of 6-7 per cent. He said that the government’s primary responsibility is to provide basic human necessities. “India spends less than 1.5 per cent of its GDP on health. By incentivising private insurance rather than focusing on public social security, the government is creating benefits for the private sector alone,” Hari said, adding that the focus should be on development and not growth or GDP figures. 

KL Dhingra, Director of National Institute of Bank Management, said, “The budget is fairly balanced but the banking sector is disappointed. We are improving in our Moody’s ratings, IMF says that we are the fastest growing economy, but the banking sector numbers are very poor.” He added, “The numbers of Non Performing Assets with banks are touching 10.2 per cent. Banks are hardly seeing any credit growth and money is not earning interest.”

Shubhashish Gangopadhyay, Founder Director of India Development Fund, said, “India currently spends Rs 20 billion on healthcare. In effect, the insurance scheme has raised it to Rs 250 billion, which is a huge jump. Indian healthcare is similar to the one in US. Making insurance public and health service private results in increased cost of healthcare. The government should rather build and upgrade hospitals and healthcare services.” He also said that more than 60 per cent farming families earn less than 40 per cent of their income from farming and so the solution of farmers’ problems is not in agriculture but outside it. 

Dr Vijay Kelkar, in his concluding comments, said that this budget falls short on all metrics. He said that in times when the challenges are increasingly structural, the government is moving away from structural solutions. “A body like the Planning Commission helps in keeping a holistic view of the economy. The current government should empower the NITI Ayog and work on building capacity of states for financial federalism,” he said.

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