Instead of seriously applying corrective measures, the political leadership is taking an easy route of indulging in blame games whereas both the regimes failed to apply fiscal discipline leaving no money for development and embroiling state in virtual debt trap, asserts Dr. S.S. Johl in The Tribune
It has become a compulsive reactive norm for all political parties in India that while in opposition they would oppose every good or bad action of the government and when in power, would shift the blame of their non-performance on the previous government.
This is particularly so at the level of provincial governments. Taking Punjab as an illustration, the state is in virtual debt trap today. Government machinery, comprising politicians and employees has become self serving. The revenue expenditure has been constantly exceeding the revenue receipts for the last two decades and has now reached disquietening levels.
The government borrows heavily to fill the gap between revenue receipts and revenue expenditure in order to pay salaries, pensions, interest on debt and meet other committed expenses. There is virtually no money left for development.
Day by day the state finances are taking deeper and deeper plunge. Instead of going serious to apply corrective measures, the political leadership is taking an easy route of indulging in blame games.
“The previous government emptied the coffers” was the charge repeatedly made by the previous Parkash Singh Badal government. The subsequent Congress government raised the pitch of this statement and now the Akali-BJP government has picked up the threads again and is repeatedly blaming the previous government for the financial mess created during its regime leading to “empty coffers”.
Let us look a bit analytically at the mess created by these two regimes. The state started witnessing an annual revenue deficit from the financial year 1987-88 with revenue expenditure exceeding the revenue receipts by Rs. 229.02 crore. The revenue deficit never looked back thereafter.
When the previous Akali-BJP government took over in 1997, the revenue deficit was Rs 1,357.06 crore (in 1996-97). In their first budget of 1997-98 they raised it to Rs. 1,483.90 crore. By 2001-02, the revenue deficit increased to Rs. 3,781.19 crore.
In the five-year regime, the total revenue deficit amounted to Rs. 12,958 crore. This works out to an average annual excess expenditure of Rs. 2,591.60 crore on revenue account over the revenue receipts.
The Congress government started with the budgeting of revenue deficit at Rs. 3,753 crore, marginally lower by Rs. 27.25 crore from the previous year deficit of the Akali-BJP regime. This government brought the revenue deficit down to 2,190.60 crore in the budget of 2006-07. Yet, the Congress government incurred a revenue deficit of Rs. 15,138.30 crore in five years, clocking an average revenue deficit of Rs. 3,027 crore per annum.
With this mounting annual revenue deficit, the total debt stock of the state increased from Rs. 15,250 crore in 1996-97 to Rs. 32,496 crore in 2001-02 during the previous Akali-BJP regime.
This piling up of the debt stock occurred despite the fact that the Central government and the Finance Commission waived the special term loan amounting to Rs. 2,433.74 crore in three years from 1997-98 to 1999-2000.
Thus the Akali-BJP government increased the debt stock of the state by Rs. 17,246 crore in spite of this waiver. By the time the Congress government demitted the office this year, the debt stock of the state had risen to Rs. 47,801 crore.
This government added Rs. 15,305 crore to the debt stock of the state in the five years of their governance. Now the Akali-BJP government, while whipping the previous regime for “emptying the coffers”, itself has budgeted an addition of Rs. 4,963 crore to the debt stock of the state raising it to a level of Rs. 52,764 crore.
These borrowings by the successive governments have landed the state into a situation of virtual debt trap. The annual burden of interest on debt stock of the state which was Rs 161.19 crore in 1987-88, when the state started showing revenue deficit, rose to Rs 1,634.44 crore in 1996-97.
Both the regimes failed to apply fiscal discipline and are equally responsible for the financial stress on the public exchequer. This is a typical case of the pot calling the kettle black and it is being done with impunity.
There is nothing like trunks and coffers that get filled up by one regime and emptied by the other. It is not that political leaders do not understand it, but they are unable to restrain themselves from this blame-game and thereby befooling the masses endlessly.
If the parties in power have the interest of the state in their priorities, they must resort to fiscal discipline. For instance, on expenditure side, administrative structure must be rationalised, downsized and made more efficient. Corporations and public enterprises running into constant losses that are not capable of making any profit, must be wound up, the committed expenditure must be rationalised and reduced. Subsidies must be targeted to the really deserving beneficiaries and every expenditure must undergo an impact analysis.
Above all, the political burden on the exchequer must be reduced, which is a heavy cost on account of accommodating party politicians in positions like parliamentary secretaries, chairmen of corporations and boards etc and police security be reduced from a status-symbol to the bare necessity.
On the revenue side, the tax structure must be rationalised, the revenue leakage and tax evasion must be checked. Accountability of the tax collectors be ensured and tax payers be treated with respect. The introduction of a credible social security system for the taxpayers can go a long way in boosting the state revenue receipts.
These are quite feasible options, but require a change in the mindset from myopic politics to statesmanship that will entail long-range vision and political will to take hard decisions, that are utterly lacking in our political class of today.
This is particularly so at the level of provincial governments. Taking Punjab as an illustration, the state is in virtual debt trap today. Government machinery, comprising politicians and employees has become self serving. The revenue expenditure has been constantly exceeding the revenue receipts for the last two decades and has now reached disquietening levels.
The government borrows heavily to fill the gap between revenue receipts and revenue expenditure in order to pay salaries, pensions, interest on debt and meet other committed expenses. There is virtually no money left for development.
Day by day the state finances are taking deeper and deeper plunge. Instead of going serious to apply corrective measures, the political leadership is taking an easy route of indulging in blame games.
“The previous government emptied the coffers” was the charge repeatedly made by the previous Parkash Singh Badal government. The subsequent Congress government raised the pitch of this statement and now the Akali-BJP government has picked up the threads again and is repeatedly blaming the previous government for the financial mess created during its regime leading to “empty coffers”.
Let us look a bit analytically at the mess created by these two regimes. The state started witnessing an annual revenue deficit from the financial year 1987-88 with revenue expenditure exceeding the revenue receipts by Rs. 229.02 crore. The revenue deficit never looked back thereafter.
When the previous Akali-BJP government took over in 1997, the revenue deficit was Rs 1,357.06 crore (in 1996-97). In their first budget of 1997-98 they raised it to Rs. 1,483.90 crore. By 2001-02, the revenue deficit increased to Rs. 3,781.19 crore.
In the five-year regime, the total revenue deficit amounted to Rs. 12,958 crore. This works out to an average annual excess expenditure of Rs. 2,591.60 crore on revenue account over the revenue receipts.
The Congress government started with the budgeting of revenue deficit at Rs. 3,753 crore, marginally lower by Rs. 27.25 crore from the previous year deficit of the Akali-BJP regime. This government brought the revenue deficit down to 2,190.60 crore in the budget of 2006-07. Yet, the Congress government incurred a revenue deficit of Rs. 15,138.30 crore in five years, clocking an average revenue deficit of Rs. 3,027 crore per annum.
With this mounting annual revenue deficit, the total debt stock of the state increased from Rs. 15,250 crore in 1996-97 to Rs. 32,496 crore in 2001-02 during the previous Akali-BJP regime.
This piling up of the debt stock occurred despite the fact that the Central government and the Finance Commission waived the special term loan amounting to Rs. 2,433.74 crore in three years from 1997-98 to 1999-2000.
Thus the Akali-BJP government increased the debt stock of the state by Rs. 17,246 crore in spite of this waiver. By the time the Congress government demitted the office this year, the debt stock of the state had risen to Rs. 47,801 crore.
This government added Rs. 15,305 crore to the debt stock of the state in the five years of their governance. Now the Akali-BJP government, while whipping the previous regime for “emptying the coffers”, itself has budgeted an addition of Rs. 4,963 crore to the debt stock of the state raising it to a level of Rs. 52,764 crore.
These borrowings by the successive governments have landed the state into a situation of virtual debt trap. The annual burden of interest on debt stock of the state which was Rs 161.19 crore in 1987-88, when the state started showing revenue deficit, rose to Rs 1,634.44 crore in 1996-97.
Both the regimes failed to apply fiscal discipline and are equally responsible for the financial stress on the public exchequer. This is a typical case of the pot calling the kettle black and it is being done with impunity.
There is nothing like trunks and coffers that get filled up by one regime and emptied by the other. It is not that political leaders do not understand it, but they are unable to restrain themselves from this blame-game and thereby befooling the masses endlessly.
If the parties in power have the interest of the state in their priorities, they must resort to fiscal discipline. For instance, on expenditure side, administrative structure must be rationalised, downsized and made more efficient. Corporations and public enterprises running into constant losses that are not capable of making any profit, must be wound up, the committed expenditure must be rationalised and reduced. Subsidies must be targeted to the really deserving beneficiaries and every expenditure must undergo an impact analysis.
Above all, the political burden on the exchequer must be reduced, which is a heavy cost on account of accommodating party politicians in positions like parliamentary secretaries, chairmen of corporations and boards etc and police security be reduced from a status-symbol to the bare necessity.
On the revenue side, the tax structure must be rationalised, the revenue leakage and tax evasion must be checked. Accountability of the tax collectors be ensured and tax payers be treated with respect. The introduction of a credible social security system for the taxpayers can go a long way in boosting the state revenue receipts.
These are quite feasible options, but require a change in the mindset from myopic politics to statesmanship that will entail long-range vision and political will to take hard decisions, that are utterly lacking in our political class of today.
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