For the corrective decisions taken by Finance Minister Nirmala Sitharaman during the year 2021-22, she is getting accolades from all around, but she has done one more thing which has been discussed less. Sitharaman said in his budget speech that the 2020-21 fiscal deficit of the country reached 9.5 percent, which is Rs 1848655 crore in rupee terms. If we compare this with the 3.5 percent target of the fiscal deficit kept in the previous budget i.e. Rs 796337 crore, then this difference is huge.
Had this budget come under normal circumstances, the figure would have created panic among the media and experts. But in the backdrop of the Corona epidemic, because the fiscal deficit was already expected to be more than 7 percent, the 9.5 percent figure also did not cause much stir. But even if the situation in Corona had not arisen and the government had achieved its target of fiscal deficit, the revised estimate of fiscal deficit for 2020-21 would have been more than Rs 307048 crore. Why?
The answer to this question can be found by looking at the details of the government’s expenses. The 2020-21 estimate of food subsidy was Rs 115570 crore, but in the amendment estimate presented by the Finance Minister, it has been increased to Rs 422618 crore. After all, where did this money go? The Finance Minister has stated this in paragraph 143 of his budget speech. He said, “In my 2020–21 budget, I expanded the scope and coverage of the statement by including the debt owed by the government to the Food Corporation of India (FCI). Taking a further step in this direction, I propose to discontinue the NSSF loan to Food Corporation of India for food subsidy by making budgetary provision in revised estimates 2020-21 and budget estimates 2021-22. ”
It is clear that Sitharaman has closed his account after paying Rs 3 lakh crore outstanding to FCI. This in itself is a very big event in terms of accounting for the Government of India. In fact, FCI sells paddy and wheat on behalf of the Government of India at MSP to sell it to PDS at a very low price. In this sequence, the deficit has to be met by the central government. But till now it had been that only a part of FCI’s losses was given by the Center and the remaining amount had to be taken as loan from the National Small Saving Fund (NSSF).
In this way, although the government reduced its deficit, the reality was that it would defer its liability for the following years. This can be called accounting fraud, through which governments used to keep the fiscal deficit close to the target. For example, the total liability of the government to FCI in 2019-20 was Rs 317905 crore. But the Finance Minister gave him only 75000 crores. That is, by avoiding the liability of about 2.5 lakh crores the next year, he reduced his fiscal deficit as much.
Sitharaman did the same thing in his 2020-21 budget, when he allocated Rs 115570 crore on food subsidy. But in his budget speech, he made it clear that not only the entire liability of FCI has been abolished in the current year, but for the next year 2021-22, a provision of Rs 242836 crore has been made for it. Not only this, Sitharaman, while making a policy decision, also declared that FCI will not have to take any loan from NSSF from Ainda. That is, if there is more expenditure on food subsidy, then it will be added in the next year’s budget in the revised estimate.
This is a very big corrective decision of the Modi government in itself, which is not important only in terms of accounting. In a way, the Modi government has also defied the rating agencies around the world, which are trying to influence the economic policies of governments and countries with their sovereign ratings. These are the same agencies that did not get tired of giving Lehman Brothers an A grade rating until a few months before the bankruptcy of Lehman Brothers in 2008.
Finance Minister Nirmala Sitharaman’s clearing of FCI’s accounting shows the morale and strong will of the government that India will be built in line with Indian needs. In a way, it is called another declaration of the commitment of the Modi government to a self-reliant India.