There is little doubt about the government’s anxiety to present a “realistic” fiscal deficit number in the budget. But, in its hurry to pare the deficit, the government may be landing the axe in the wrong places.
A Reuters story on 31 January said serious cuts may be made in the budgets of the defence ministry, the atomic energy department, and the ministry of road transport and highways, among others. One reason is the rising subsidy bill.
Trying to balance short-term fiscal constraints by pruning expenditure in long-term projects is not a terribly bright idea. In any case, atomic energy, defence and road infrastructure are not merely of economic importance, but have a strategic dimension as well. The costs of foregoing such expenditure cannot be evaluated in financial terms alone. It will be much better if the finance minister reduces non-Plan expenditure.