New Delhi: Former Finance Minister Yashwant Sinha today asked the government to show the political will to bite the bullet by checking the alarming fiscal deficit in the Union Budget to control inflation.
Delivering the keynote address at a roundtable on budget, organised by Observer Research Foundation, Sinha said the government has fallen into the vicious cycle of increasing fiscal deficit, especially the revenue component, which has led to rising inflation and increasing prices.
"When you fall into the vicious cycle, you take a step to get over a problem and that lands the government again into another crisis and it goes on worse," he said.
Sinha, who is the Chairman of the Parliamentary Standing Committee on Finance, pointed out that according to the Economic Survey in 2004, the economy seemed resilient, with large scope for consolidation of gains, but according to the statement of the Prime Minister on September 11, 2012, the economy was in a crisis - "last time we faced this problem was in 1991".
Talking of the various sectoral issues, Sinha said the villages have not benefited from the growth. He said key sectors, including agriculture, telecom, education, infrastructure, health all are in crisis.
Sinha also underlined the need for checking the unaudited expenditure through various Centre-funded schemes. The expenditure is estimated to be more than INR 2,37,000 crores, according to M.K. Venu, the Managing Editor of the Financial Express.
Critiquing the lack of emphasis on substantive capital market reforms, Dr. Muneesh Kumar, Professor, Financial Studies, Delhi University, underlined the need for the reviving primary market through holistic and progressive policymaking. Instead of taxing the market through policies such as the Securities Transaction Tax (STT) or the proposed Commodities Transaction Tax, existing structures should be enforced strictly.
He pointed out how wrong policies are distorting markets, like in the case of gold and real estate.
Neha Malik from ICRIER also underlined the need for further study before market taxation. With the introduction of the STT, a number of stock exchanges reported that volumes have migrated to other international stock exchanges.
N.K. Singh, MP and former Union Revenue Secretary, who moderated the roundtable, said the wastage of such a huge amount by the Centre is in contravention of the Constitution itself, as the money in fact belonged to the States.
Saying we are slow on reforms, Dr Alok Pandey, Professor, Asia Pacific Institute of Management, said we needed a "path-breaking" budget this year to tide over the crisis.
Jayshree Sengupta, senior fellow, ORF added that supposedly big ticket reforms such as FDI in multi-brand retail are simply not enough to generate interest in the economy.
Dr. Pronab Sen, Country Director, International Growth Centre, said the problem is all the governments are ducking the question of "what sort of economy do we want to be"?
T.K Arun, Editor, Opinion, of the Economic Times said economic reforms cannot be divorced from the need for transparent political and election funding. "Till we bring about transparency in election funding, the problem will continue," he said. He said we also lacked the political will to bring about effective economic reforms.
Dr. Charan Wadhva of the Centre for Policy Research reminded every one that this is the last budget of this government before the election and so, one needs to be realistic as far as hard decisions are concerned. He impressed on the need to channel savings to capital formation.
Former Union Cabinet Secretary and Advisor to ORF, Surendra Singh, was apprehensive about the government's cash transfer scheme. Pointing towards the increasing social unrest, he called for effective economic reforms, which would rein inflation and control unemployment.