Accounting Jugglery: Is it right Mr. Chidambaram?

‘Accounting Jugglery’ is what it’s called, and almost all Finance Ministers including our P Chidambaram is entirely conscious about the principles laid out in the particular subject book. Interim Budget or vote-on-Account made headlines the following day in almost all the national dailies of the country for the main reason our ever-inflating fiscal crisis has been contained at a surprising number of 4.6, much better than the earlier targeted 4.8 per cent.

Not many governments across the world including the past ones in India have been so much successful in achieving the improbable and that too with a minimum of “fuss.” Reigning the deficit at a pre-determined level, despite the global economy still recuperating from the turmoil and Foreign Institutional Investors (FIIs) still playing the main anchor for us, our Harvard educated Finance Minister P Chidambram came up with the magic. Magic it may seem but true to the core.

Amusingly, if you go by what the Interim Budget literature reads, tax revenue was recorded lower by Rs 77,000 in the fiscal year 2014 from the budgeted amount. Not stopping at this, Chidambaram, fully supported by the “ever populist” Congress high command, targets the fiscal deficit for the fiscal year 2015 further capping to 4.1 per cent.

What abetted the containment of the fiscal deficit if tax revenues failed to play the protector?

The only way out for the ballooning fiscal deficit to be restricted in such a paranormal way is through “meticulous” expenditure cuts.

· Non- Plan capital expenditure was cut by Rs 30,000 crore from the budgeted amount for FY14

· Plan capital expenditure was cut by around Rs 9,000 crore.

This is how the Rs 48,000 crore of tax revenue cut has been compensated by the government at the centre, using the total of Rs 40,000.

What about the remaining round about Rs 30,000 (Rs 77,000 - Rs 48,000)?

Here lies the real catch. The remaining amount of Rs 30,000 would have to be stomached-up by the state governments. Opposition is in making in the coming days if the next government also goes by the principle.

This is what we can best call ‘accounting jugglery’.

Won’t the cut down in planned expenditure affect growth?

It will surely affect the growth. Something around 4.9 per cent is the rate of growth for us presently and market wants it to climb up and reach back to the golden days of the UPA-I soon. Nonetheless, amidst slowdown in industry, customs, excise and tax collections, the future course for our economy appears a bit tough – not as rosy as Mr. Chidambaram projects.

Raising “erroneous” hopes through fudging of account books can only bring laurels for now, but only cries in future.

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