Seeking Fiscal Prudence in Union Budget!

Abstract

The ideas of John Maynard Keynes have dominated the 20th century macroeconomic theory and ushered fundamental changes in the economic policies pursued by the governments all over the world. He emphasized the significance of 'Fiscal Stimulus' to mitigate the adverse effects of economic slowdowns and downturns. Since then, the policy makers at large took the clue and have been adopting Deficit Financing as an effective instrument for the purposes of:

(i) Stimulating Economic Development, and

(ii) Overcoming Financial Stresses and Strains.

A growing enterprise garners stakeholder credibility and is able to turn around its current assets very fast and service the current liabilities on dot. On the same analogy a credible deficit infused towards economic development has to be self gearing and servicing.

Eliminating RD altogether, containing FD to 3% and limiting the liabilities to 40% of GDP - as has been targeted by the successive Finance Ministers over the decades - are commendable and if, and only if, achieved, can certainly lead to Ease of Indian Fiscal Deficit. Indian deficits, if contained to normative levels, can accelerate the economic development with astonishing pace and work wonders. What appears to be lacking is political will and administrative acumen.

A scrupulous and onerous target that can be thought of in this respect is that 'Balancing the Budget over a period of Political Cycle of five years' as would be the case of 'Balancing Working Capital over one Business Cycle'. And, there lies Indian Fiscal Prudence which every Indian continues to seek for decades and decades!