...........There is a deeper problem here. The credibility of Indian fiscal statements is generally weak. A careful analysis of budgets over the past 25 years by economists Deepa Vaidya and K. Kanagasabapathy of the EPW Research Foundation shows that finance ministers consistently overestimate revenues and underestimate expenditure when they present their budgets. The result is that the actual fiscal and revenue deficits are far higher than what has been promised in the initial budget estimates. This tendency is starker during interim budgets. They say that..................
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The suggestion for a new edifice with three ‘pillars’ namely, a new fiscal law on the lines of the Fiscal Responsibility and Budget Management Act, a neutral fiscal watchdog akin to the US Congressional Budget Office (CBO) and slashing the statutory liquidity ratio is worth pondering over. This is despite the reality that if the banking sector does not remain ‘the’ captive market for government bonds, at this stage of development, GOI will have to find some other pastures for ‘making both ends meet. Even a loud debate over this suggestion will wake up the finance ministry bosses who are eager to take over ‘debt management’ from Reserve Bank of India, under the wrong notion that Public Debt Management is a 'pleasant' job.
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