The White Paper on the Indian Economy, presented in the Lok Sabha by Finance Minister Nirmala Sitharaman, harshly criticizes the previous UPA government for driving "public finances to a perilous state" through unchecked fiscal deficits.
According to the paper, during the period from FY09 to FY14, India consistently witnessed a Gross Fiscal Deficit (GFD) to Gross Domestic Product (GDP) ratio of at least 4.5 percent. In some years, this ratio exceeded 6 percent, reflecting a concerning trend of runaway fiscal deficits that pushed the economy towards a fiscal crisis.
The paper references the observations of the Kelkar Committee for Fiscal Consolidation, which warned of the Indian economy teetering on the edge of a fiscal precipice. The committee's analysis highlighted a potential fiscal deficit of around 6.1 percent in 2012-13, significantly higher than the budget estimate of 5.1 percent of GDP, unless immediate corrective measures were taken.
A significant contributor to these deficits was the issuance of special bonds instead of cash subsidies to entities like oil marketing companies, fertilizer companies, and the Food Corporation of India by the UPA government. These bonds, totaling over Rs 1.9 lakh crore from FY06 to FY10, inflated annual subsidy bills, exacerbating fiscal and revenue deficits.
The paper further underscores the UPA government's fiscal mismanagement, which led to fiscal deficits surpassing expectations, resulting in a substantial increase in market borrowing, exceeding the budgeted amount by 27 percent in 2011-12.
In contrast, the White Paper commends the Modi government's efforts to restore fiscal health by curbing fiscal deficits and reducing market borrowing, signaling a shift towards responsible fiscal management.
(With Agency Inputs)