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My Response to Mr. Chidambaram's vote on Account Speech
The Finance Minister presented Vote on Account estimates before the Parliament today. It was an electoral imperative for him to attempt to repackage the 10 years of the UPA. He is faced with a harsh reality. He inherited an 8.5 percent GDP growth rate. He exits on a 4.5 percent GDP growth. The last three years of the UPA witnessed a sharp fall in the growth rate from a near 9 percent to less than 5 percent. He, therefore, had to lean back on larger slogans such as his 'Idea of India'. Obviously, in an ideologically pluralistic society, there can be more than one 'Idea of India'. None can usurp the title of a book and claim it only belongs to him.
The Finance Minister had set a laxman-rekha for himself last year. The fiscal deficit had to be brought down to 4.8 percent. He now claims to have brought it down to 4.6 percent. He achieves this spectacular feat not by bringing in revenue buoyancy or by reviving the investment cycle but by cutting down expenditure, particularly the capital expenditure. The grants for creation of Capital Assets and Capital Expenditure has been cut down by as high as Rs. 91,000 crores. This alone would have impacted the GDP to the extent of 0.8 percent. Similarly, allocations to various Ministries in the current year shows wide difference between the Budget estimates 2013-14 and the Revised Estimates of 2013-14. The grant to the Ministry of Drinking Water and Sanitation are cut down by 21. 3 percent. The grant to the Ministry of Health and Family Welfare is cut down by 20.6 percent. The grant to the Housing and Urban Poverty Alleviation is cut down by 41.97 percent, MHA by 31.3 percent, Ministry of HRD by Six percent, Ministry of Road Transport & Highways by 18.72 percent and Ministry of Rural Development by 22.92 percent. . These are all departments and ministries which relate to social sector and infrastructure. Only the Ministry of Finance grants have been increased by 18.3 percent.
Then the grants to the States have been cut down from the Budget Estimates of Rs. 1,36,254 Crores to Rs. 1,19,039 Crores- a reduction of 12.6 percent.
This slowdown in the manufacturing sector is a huge concerns. This directly reflects on job creation. The excise duties in the current year, which were estimated to be Rs.1,97,554 Crores has now been revised to Rs.1,79,538 - a reduction of 9.1 percent.
The FM has taken credit for the stellar performance of the Agriculture sector but the real credit goes to the States like Gujarat , Madhya Pradesh and Chhatisgarh which have consistently given double digit growth rates in Agriculture.
The subsidy outgo on Food, Fertilizer and Fuel has been projected at Rs. 2,46,397 Crores for 2014-15. Out of this, fuel subsidy is at 65,000 crores, Fertilizer at 36,970 crores and Food subsidy is at 1,15,000 crores. The combined expenditures on all Food schemes has been reduced from 1,24,844 Crores in 2013-14 to 1,15,000 crores in 2014-15 representing a fall. This is much below the expectations under the food security scheme which requires a much larger outlay. The subsidies in fuel has been underestimated year after year. The FM has once again rolled over fuel subsidies worth Rs.35,000 Crores to the next fiscal. This move is a mere statistical illusion to keep the fiscal deficit look optically correct while its inflationary impact on the economy remains real.
The FM has again harped on the OROP viz. the one rank one pension scheme and transferred Rs.500 Crores to the Defence Pension Account. The UPA Government has been paying lip service to the cause of defence personnel. In the earlier Budget in 2009-10, a committee was set up and its recommendations were promised to be implemented. But the grievances remained as the approach was half-baked. Again the FM has promised that this cause has been completely addressed in this Budget. There should be no attempt to play with the aspirations of our Armed Forces.
Even though the Vote-on-Account is only for a period of four months, there are serious concerns on the growth rate, real Fiscal deficit, inflation, investment and the slow down in manufacturing sector. The stability of the Rupee is a matter of concern particularly because the Rupee itself has reached unacceptable levels.
Will the Finance Minister seriously introspect on the legacy he would leave behind for the next Finance Minister?The Finance Minister will be a relieved man today. His successor will be in trouble.