FM hints at changes in borrowings

NEW DELHI, MARCH 30: Finance minister Yashwant Sinha has hinted at a change in the maturity profile of the government's borrowing program...

NEW DELHI, MARCH 30: Finance minister Yashwant Sinha has hinted at a change in the maturity profile of the government8217;s borrowing programme to reduce the interest burden. Speaking at a seminar here, Sinha also said that a constitutional cap on borrowing was not workable.

quot;A constitutional limit on borrowing will be a hamhanded solution unless we prepare the ground for it,quot; Sinha said. quot;No government can go on living on borrowed funds for any given time,quot; Sinha said.

The finance minister expressed concern at the alarming increase in the internal liabilities of the government. The liabilities are likely to climb from Rs 2,83,000 crore in 1990-91 to Rs 8,10,000 crore in 1998-99. Interest payments could touch the Rs 1,00,000-crore mark in a couple of years.

Stating that almost half the fiscal deficit was due to revenue deficit, the finance minister said one way of increasing the revenue receipts was by levying actual charges for utilities.

Justifying the transfer of small savings from the ConsolidatedFund of India to the public account, the finance minister called for a change in the accounting procedures. But, he added, quot;I am accused of playing with figures to reduce the fiscal deficit.quot;

While emphasising the need for the practical measures to broadbase the tax base, he said that the tax-GDP ratio should be increased.

However, Sinha did not feel that coalition politics puts any constraints on fiscal management. quot;I don8217;t think that coalition politics stands in the way of prudence. I faced problems on other fronts, but coalition politics was not one of them. In fact, the highest deficit recorded in the country was in the late eighties when the then government enjoyed the largest ever majority in the Lok Sabha.quot;

Story continues below this ad

Plan after plan, we have been creating assets, and then leaving them at God8217;s mercy, the finance minister said. Without proper maintenance, they are reduced to quot;modern ruinsquot;. He specifically mentioned the sorry state of the Indira Awaas and several irrigation schemes.

quot;We have been very,very lax as far as user charges are concerned,quot; Sinha pointed out. But collecting such charges is easier said than done. Many states which have taken hard decisions to collect user charges have faced bandhs and hartals, he said, adding that he has been criticised for even the small measures he has taken to improve the fiscal situation.

The fact that power is shared by various parties at the Centre and the states is quot;the biggest incentivequot; to reach at a consensus on fiscal prudence, Sinha said.