Fiscal deficit estimates: Chidambaram says he is right because he is always right

In a spirited defence of his budget math, finance minister P Chidambaram has said that his estimates over the last three years have been proved right and so will be next year’s projections.

In an interview to Karan Thapar on CNN-IBN, Chidambaram said no experts have been able to produce evidence to prove that his budget estimates are fudged and so his estimates for the next year will be proved right once the revised estimates come.

The proof of the pudding is in the revised estimates, he said in reply to a question. In fact, through out the interview, he harped on the same answer no matter how serious the question was and how accurate the data was.

Asked about Moody’s finding that the government may have underestimated the fuel subsidy bill by 30-40 percent for the current year, the minister said Moody’s doesn’t have the number or the data that he has.

“Last year, we had rolled over Rs 45,000 crore. And they (the experts) said that hides the true figure. This year we have shown the accounts and we did roll over only Rs 45,000. This year we say we are rolling over Rs 35000 crore. Wait for the revised estimate for the next year and you will find we have rolled over only Rs 35,000 crore,” he said.

Ashok Gulati of the Commission for Agriculture Costs and Prices (CACP) has said that the budget has not admitted to Rs 80,000 crore of food and fertiliser subsidies. if that is factored in, the fiscal deficit will be 5.2 or 5.3 percent and not 4.6 percent.

According to Thapar, the Food Corporation of India has made procurements worth 40,000 crore above and beyond your figure of Rs 92000 crore budgeted this year. When asked whether this is a rollover, Chidambaram said the budget is not bothered about how the food procurement agency finances its purchases.

“What the FCI procures and how it finances it is a matter between the FCI, ministry of consumer affairs and the banks. I am talking about the fsic,” he said.

“I am only concerned about what the budget gives to A or B or C. We have provided the food subsidy for the next year at Rs 1.15 lakh crore. A firm hand on the wheel can keep the food subsidy at the Rs 1.15 lakh crore,” he said.

The finance minister failed to give a convincing reply to the question on whether the budget allocation to the fertiliser ministry was also short of the demand. Thapar said, citing Satish Chandra of the department of fertilisers, that the actual demand was Rs 105,000 crore while the allocation was only Rs 68,000 crore for this year. If these figures are true, the shortfall of Rs 37,000 crore would also amount to a rollover to the next financial year.

“Ministries will always ask for more,” Chidambarm said, adding “But the proof of the pudding is the revised estimates.”

He also denied a report in the Business Standard, which had estimated that the actual rollover of subsidies from the last year was over Rs 100 000 crore.

“Look at the revised estimates audited by the CAG and you will find that my estimates are not wrong,” he insisted.

An editorial in the Business Standard has pointed out the interim budget has not made any provision for food and fuel subsidies for which there is a shortfall of over Rs 75,000 crore and the only way out for the ministries concerned-issuing long- term bonds and making special banking arrangements-is unlikely to succeed.

Another article by HDFC Bank’s chief economist Abheek Barua has estimated that the current financial year’s fiscal deficit is unlikely to be true as the government has already reached 95 percent of this figure by 31 January. If the figure is indeed correct, then the government is only left with about Rs 8000 crore for the next two months.

Chidambaram refuted these claims saying these figures are wrong. “They (the experts) say this every year,” he said.

“I am not going to question their (the experts’) intelligence and their ability. I certainly don’t agree that they can question the officials of the finance ministry and our experts’ intelligence and ability,” Chidambaram said.

If all of the finance minister’s replies could be summarise into a nutshell, it would be: I am right because I am always right. Everybody else is wrong.