Borrow like there's no tomorrow
The Indian Union Budget was presented yesterday – normally this is presented on the last day of February, but this year because of the elections and the new government, it is being presented now.
A zillion columns have been, and will be, written on the budget. The stock market reacted yesterday by tanking 6%. Many experts will dissect the budget and depending on where they come from, will either laud it or criticize it.
The budget is full of jargon and incomprehensible to a layman. It also carries tons of detail and is a very tough read. I had argued some months back on the budget being “the Great Indian Rope trick” – Click here and here to read it. And when Pranabda presented the interim budget in February, I argued that even the rope is gone.
In this post I’m focusing on one theme, and to me the dominant theme – the borrowing binge that’s going on.
After rehashing the government presented numbers, the overall situation is somewhat like this. Government will get cash inflows of Rs 7.2 trillion. And it will spend Rs 12.2 trillion. How does it bridge the gap. It simply borrows. Now this is the central government. Every state government does the same thing.
Now which sensible person will earn 7 and spend 12 ? And keep doing something like this year after year. Today a full one third of all revenues goes just towards meeting interest payments. And this number keeps rising year after year.
If this were a company and not the government, it would have gone into liquidation by now. The market would have hammered its share price down to zero. Unfortunately there is no stakeholder to really control the government.
Indian tradition is one of thrift. Of spending and living within your means. Not borrowing like a madman.
How does one drill some sense of responsibility into governments to spend only what they earn ? A futile cause, I'm afraid. Doesn't work in this world. Just turn to the state of California for inspiration on recklessness.
A zillion columns have been, and will be, written on the budget. The stock market reacted yesterday by tanking 6%. Many experts will dissect the budget and depending on where they come from, will either laud it or criticize it.
The budget is full of jargon and incomprehensible to a layman. It also carries tons of detail and is a very tough read. I had argued some months back on the budget being “the Great Indian Rope trick” – Click here and here to read it. And when Pranabda presented the interim budget in February, I argued that even the rope is gone.
In this post I’m focusing on one theme, and to me the dominant theme – the borrowing binge that’s going on.
After rehashing the government presented numbers, the overall situation is somewhat like this. Government will get cash inflows of Rs 7.2 trillion. And it will spend Rs 12.2 trillion. How does it bridge the gap. It simply borrows. Now this is the central government. Every state government does the same thing.
Now which sensible person will earn 7 and spend 12 ? And keep doing something like this year after year. Today a full one third of all revenues goes just towards meeting interest payments. And this number keeps rising year after year.
If this were a company and not the government, it would have gone into liquidation by now. The market would have hammered its share price down to zero. Unfortunately there is no stakeholder to really control the government.
Indian tradition is one of thrift. Of spending and living within your means. Not borrowing like a madman.
How does one drill some sense of responsibility into governments to spend only what they earn ? A futile cause, I'm afraid. Doesn't work in this world. Just turn to the state of California for inspiration on recklessness.
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