On The Budget

I am a bit late in commenting on the Budget, but the rain has been incessant (lovely!) and the power has been erratic (ugh!). But what the hell. I read Karan Thapar’s Sunday column in HT, and he was complaining about power cuts in New Delhi. This is the scene everywhere in socialist India: bijli, sadak, paani. [Power, roads and water.] And you will not find allocations on any of these in the Budget.

There is Education. There is Defence. The Social Sector. Poverty Alleviation. Rural Employment. Fertiliser subsidy. PSU losses. And now, Cheap Rice.

And, for spending on these, there is always a huge Budget Deficit. We have seen such deficits year after year for 60 years, and the only result has been that the value of the rupee has plummeted. Then, there were 1p and 2p coins - that is, coins that mattered, had value, and were circulated. Now, we have 10 rupee coins. Even 50p coins cannot be found. Our "economists" have always supported these deficits, as have the crony business elite. But poverty has not disappeared. If only it could simply by printing money.

Well, here is some good news for those who don't like Budget Deficits.

S&P have announced that India’s sovereign credit rating, which was downgraded to negative in February, will probably be further downgraded in view of the huge fiscal deficit. How much is the deficit?

“Including state government deficits and off-balance-sheet items such as oil and fertilizer bonds, the deficit is estimated to reach about 12% of GDP in fiscal 2009-2010,” S&P said.

Manmohan & Co. don’t have the money. It is silly [non-speculative] to buy their bonds – because they are not “investors” of money; they simply blow it up. They earn no returns on Capital. This is perpetual irredeemable DEBT.

If you possess Capital, you must speculate with it; not park it in government bonds.

If we try and peek into the minds of our rulers, we see in them two clear traits: one, the false idea that the economic resources available to them are limitless; and two, a “politics” that is inherently false too, in the precise sense that it is based on untruth, in that they conceal from the public the real aims (and the real costs) of their policies. They have a secret private agenda that does not tally with the interests of the commonwealth.

As far as the Science of Economics is concerned, all I can say is that this Science is based on three pillars: economic theory, economic policy, and public finance. We know they are zeroes in theory and policy; we now know they are zeroes in public finance as well.