Plumbing problems

Plumbing problems

The by-now familiar wheel of ‘how the rupee comes and how the rupee goes’ has lost relevance, if not significance. In the current times of scams, corruption and leakages, it seems more relevant to see how much of the money that government spends is prone to leakages.

Also See | Plumbing problems (PDF)

The accompanying economic hydraulics graphic shows that almost 60% of the total budgeted expenditure of the Centre budgetary passes through the creaky and leaky pipes of the government, be it capital expenditure or revenue expenditure. The bulk of the remaining 40% is institutional transfers such as interest payments and grants to states. These will, in turn, start leaking at the last point of spend.

The hydraulic set-up also points to the poor state of government finances wherein the Union government is in a deficit even before it has started servicing its accumulated debt. If devolution to states is included, then the picture is even gloomier.

The moral of the story is that before financing higher expenditure, better fix the leakages. Towards this end, the government has made a move by committing to move to direct cash transfers for kerosene, fertilizer and LPG subsidy by the next fiscal.