March 10th, 2006, Magna Est Veritas: A down payment on the Taj Mahal, anyone?
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http://thestatesman.net/page.arcview.php?date
=2006-03-01&usrsess=1219146875859&clid=1&id=136052
Subroto Roy writes in the Statesman (1.03.06) as follows:
A down payment on the Taj Mahal, anyone?
The one thing to look for in any year’s Budget is the size of interest-payments the government is paying on India’s existing stock of public debt. The Statesman’s readers will know this though TV’s talking heads and the pink newspapers do not to want to mention it. Annual interest payments made by the Union and state governments together are now about Rs 2 lakh crore (i.e. Rs 2 trillion or a 2 followed by 12 zeroes), paid on a public debt of about Rs 30 lakh crore (Rs 30 trillion).
For years the Comptroller and Auditor-General of India has been gravely worried about it, and that high official is the Constitution’s watchdog over the financial mischief bureaucrats and politicians (and their friends in organised business and organised labour) get up to behind their gaseous rhetoric. It hardly suffices for the finance minister or Economic Survey to make casual references to the need to control “wasteful spending”. Our de facto and de jure Prime Ministers (and the FM and Planning Commission head, who are their respective acolytes) have never come across a government spending programme they did not like. The same goes for every PM and FM in living memory. Keynes once quoted Lenin to the effect that there is no surer way of overturning a country than by debauching its currency.
What is called “gross fiscal deficit” in India is the additional public debt caused by government deficit-financing one year, adding to the stock of public debt next year. The chart accompanying this article shows how interest-expenditure paid on the public debt has been consuming a larger and larger proportion of the fiscal deficit every year. In the 1970s and 1980s (when the present PM was India’s top economic bureaucrat, and his defence minister was finance minister), the proportion was already high at more than 30 per cent. Since 1991, it has risen steadily and is now in the region of 90 per cent. In plainspeak, this is bad macro-economic financial management, and the whole of Parliament is responsible.
If the facts were told to the ordinary people who gather together every evening in India’s 600,000 villages that Bharat Sarkar has been borrowing more and more money to pay interest-expenditure on previously incurred debts, everyone there will tell you that, if that be so, Delhi’s fancy-suited bureaucrats may not know the front end of a buffalo from its rear end. Every Indian peasant also knows that the paper money and debt printed by the government is getting more and more worthless, and so he and his family prefer to hold real stores of value like metals, gold, land, cattle, machinery, jewellery, and, of course, education.
As for real economic growth, beware all attempts to create ratios of this or that to GDP in the way Delhi’s World Bank-trained bureaucrats have learnt to do. It is possible real income growth in India has been wildly under-estimated because a lot of the economy simply remains unrecorded and unknown. What is definite is that growth projections made by business lobbies, newsmagazines, “management consultants”, media anchors and company-
wallahs are more noise than signal, and your local astrologer could do just as well.
Nobody in India quite knows what is happening to national income per capita (i.e. Net National Product at factor cost divided by population growth) except it has been improving, as it has been worldwide for centuries. Why real income improves is because of naturally occurring technological progress having little to do with government. Even a growing economy may well see inequality worsen. As for interest-rates, India is labour-abundant and capital-scarce compared to the West which implies our interest-rates adjusted for inflation must be naturally above those of world capital markets, by a margin of three to four per cent, perhaps, all things considered.
And as for inflation, if you believe Dr Manmohan Singh, Mr P Chidambaram, Mr Montek Singh Ahluwalia and Dr YV Reddy saying the value of paper money has been declining by a mere 5 per cent or less every year, you might believe anything, and I would wonder if you may perhaps want to make a down payment on buying Howrah Bridge, or better still, the Taj Mahal?
Comments of Editor, Truth:
1. The Annual budget of the Indian Union has been presented in the parliament on the 28th February with much fanfare. Union Finance Minsiter Mr. P. Chidambaram, While presenting the budget, has declared with panache that "Economic growth, the best antidote available for poverty, was the aim of Budget 2006-2007." He also quoted Swami Vivekananda saying: "The wind is blowing; those vessels whose sails are unfurled catch it.... those which have their sails furled do not... Is that the fault of the wind?"
But can the Finance Minister recount with a hand on his heart the actual steps that he has proposed for the alleviation of the misery of the millions of masses in the country, who are wallowing in poverty? What are the positive steps taken by him to contain the ever-increasing inflation, which is gobbling up the real income of the common people?
2. As it has been pointed out in the above article by Subroto Roy, the annual interest payment made by the Union and State governments together are now about Rs. 2 lakh crore (i.e. Rs. 2 trillion) paid on a public debt of about 30 lakh crore (Rs. 30 trillion).
As Sri Roy aptly pointed out in another article published recently (vide The Statesman-22nd Feb. 2006) the ordinary citizens have a right to know the level of public debt and the interest being paid on it every year and how much public resources are going to be spent on each specific activity, and why.
The basic reason India's anonymous masses have remained perpetually impoverished over generations is because the Public Debt has been allowed to grow beyond New Delhi's control or even its comprehension... In India, the union government and every state government is heavily indebted and also under strong suspicion of not having used the public debt productively over past years and decades, i.e. of wasting it on corruption or Government consumption like politicians' and bureaucrats' perks and wages or expensive toys for generals, admirals or air-marshals, rather than on income-generating or useful public investment like roads, school-education and public health and sanitation.
"India's public finance inherits the consequence of fiscal mismanagement in the past"- is the single candid and altogether truthful sentence that is to be found in the innumerable pages of the Tenth Five year Plan-2003(Vol. I, p.53).
3. The grave problem that is haunting us inexorably is that India's public debt, money supply and price-level are going geometrically, while the real economy is growing arithmetically.
Attempts are being made to bridge the ever-widening chasm of fiscal deficit by printing paper-currency without proper reserves, but adequate and appropriate steps are not being taken to control much of the wasteful expenditure of the government or the ever-increasing corruption which are consuming much of our real resources.
http://thestatesman.net/page.arcview.php?date
=2006-03-01&usrsess=1219146875859&clid=1&id=136052
Subroto Roy writes in the Statesman (1.03.06) as follows:
A down payment on the Taj Mahal, anyone?
The one thing to look for in any year’s Budget is the size of interest-payments the government is paying on India’s existing stock of public debt. The Statesman’s readers will know this though TV’s talking heads and the pink newspapers do not to want to mention it. Annual interest payments made by the Union and state governments together are now about Rs 2 lakh crore (i.e. Rs 2 trillion or a 2 followed by 12 zeroes), paid on a public debt of about Rs 30 lakh crore (Rs 30 trillion).
For years the Comptroller and Auditor-General of India has been gravely worried about it, and that high official is the Constitution’s watchdog over the financial mischief bureaucrats and politicians (and their friends in organised business and organised labour) get up to behind their gaseous rhetoric. It hardly suffices for the finance minister or Economic Survey to make casual references to the need to control “wasteful spending”. Our de facto and de jure Prime Ministers (and the FM and Planning Commission head, who are their respective acolytes) have never come across a government spending programme they did not like. The same goes for every PM and FM in living memory. Keynes once quoted Lenin to the effect that there is no surer way of overturning a country than by debauching its currency.
What is called “gross fiscal deficit” in India is the additional public debt caused by government deficit-financing one year, adding to the stock of public debt next year. The chart accompanying this article shows how interest-expenditure paid on the public debt has been consuming a larger and larger proportion of the fiscal deficit every year. In the 1970s and 1980s (when the present PM was India’s top economic bureaucrat, and his defence minister was finance minister), the proportion was already high at more than 30 per cent. Since 1991, it has risen steadily and is now in the region of 90 per cent. In plainspeak, this is bad macro-economic financial management, and the whole of Parliament is responsible.
If the facts were told to the ordinary people who gather together every evening in India’s 600,000 villages that Bharat Sarkar has been borrowing more and more money to pay interest-expenditure on previously incurred debts, everyone there will tell you that, if that be so, Delhi’s fancy-suited bureaucrats may not know the front end of a buffalo from its rear end. Every Indian peasant also knows that the paper money and debt printed by the government is getting more and more worthless, and so he and his family prefer to hold real stores of value like metals, gold, land, cattle, machinery, jewellery, and, of course, education.
As for real economic growth, beware all attempts to create ratios of this or that to GDP in the way Delhi’s World Bank-trained bureaucrats have learnt to do. It is possible real income growth in India has been wildly under-estimated because a lot of the economy simply remains unrecorded and unknown. What is definite is that growth projections made by business lobbies, newsmagazines, “management consultants”, media anchors and company-
wallahs are more noise than signal, and your local astrologer could do just as well.
Nobody in India quite knows what is happening to national income per capita (i.e. Net National Product at factor cost divided by population growth) except it has been improving, as it has been worldwide for centuries. Why real income improves is because of naturally occurring technological progress having little to do with government. Even a growing economy may well see inequality worsen. As for interest-rates, India is labour-abundant and capital-scarce compared to the West which implies our interest-rates adjusted for inflation must be naturally above those of world capital markets, by a margin of three to four per cent, perhaps, all things considered.
And as for inflation, if you believe Dr Manmohan Singh, Mr P Chidambaram, Mr Montek Singh Ahluwalia and Dr YV Reddy saying the value of paper money has been declining by a mere 5 per cent or less every year, you might believe anything, and I would wonder if you may perhaps want to make a down payment on buying Howrah Bridge, or better still, the Taj Mahal?
Comments of Editor, Truth:
1. The Annual budget of the Indian Union has been presented in the parliament on the 28th February with much fanfare. Union Finance Minsiter Mr. P. Chidambaram, While presenting the budget, has declared with panache that "Economic growth, the best antidote available for poverty, was the aim of Budget 2006-2007." He also quoted Swami Vivekananda saying: "The wind is blowing; those vessels whose sails are unfurled catch it.... those which have their sails furled do not... Is that the fault of the wind?"
But can the Finance Minister recount with a hand on his heart the actual steps that he has proposed for the alleviation of the misery of the millions of masses in the country, who are wallowing in poverty? What are the positive steps taken by him to contain the ever-increasing inflation, which is gobbling up the real income of the common people?
2. As it has been pointed out in the above article by Subroto Roy, the annual interest payment made by the Union and State governments together are now about Rs. 2 lakh crore (i.e. Rs. 2 trillion) paid on a public debt of about 30 lakh crore (Rs. 30 trillion).
As Sri Roy aptly pointed out in another article published recently (vide The Statesman-22nd Feb. 2006) the ordinary citizens have a right to know the level of public debt and the interest being paid on it every year and how much public resources are going to be spent on each specific activity, and why.
The basic reason India's anonymous masses have remained perpetually impoverished over generations is because the Public Debt has been allowed to grow beyond New Delhi's control or even its comprehension... In India, the union government and every state government is heavily indebted and also under strong suspicion of not having used the public debt productively over past years and decades, i.e. of wasting it on corruption or Government consumption like politicians' and bureaucrats' perks and wages or expensive toys for generals, admirals or air-marshals, rather than on income-generating or useful public investment like roads, school-education and public health and sanitation.
"India's public finance inherits the consequence of fiscal mismanagement in the past"- is the single candid and altogether truthful sentence that is to be found in the innumerable pages of the Tenth Five year Plan-2003(Vol. I, p.53).
3. The grave problem that is haunting us inexorably is that India's public debt, money supply and price-level are going geometrically, while the real economy is growing arithmetically.
Attempts are being made to bridge the ever-widening chasm of fiscal deficit by printing paper-currency without proper reserves, but adequate and appropriate steps are not being taken to control much of the wasteful expenditure of the government or the ever-increasing corruption which are consuming much of our real resources.
posted by Shrivathsa at 5:07 AM
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