The many shades of deficit.

Our most revered Finance Minister is travelling round the world reciting just one mantra - he is going to keep the fiscal deficit to 4.8% of GDP. As though that will solve all our problems and Foreign Investors will be rushing in with sacks full of dollars to invest in new businesses, such as multi brand retail. Turns out that deficits come in different guises. There is quiet pride that the increase in taxes on gold has slashed its sales and reduced the trade and current account deficits although the weak rupee may have helped by making gold too expensive to buy. Naturally smugglers are rejoicing and are finding ever ingenious ways to bring in the precious metal. Although precious dollars are still flowing out through illicit channels it is not counted in official accounts. So, that's alright then. Fiscal deficit arises from government borrowing to finance both developmental, which includes capital expenditure such as in infrastructure, and non-developmental expenditures. Revenue deficit is government borrowing to meet non-developmental expenditures, such as salaries, defence expenditure and subsidies, most of it non-productive. This the Congress is unwilling to reduce because how else is it going to buy votes for the coming general elections. Before the 2009 elections the Congress adopted the Sixth Pay Commission and increased salaries of useless civil servants by 25% and has been increasing the Dearness Allowance until it has become equal to basic pay, thus doubling their salaries. Subsidies make up 27% of non-plan expenditure of 2012-13 and the Congress has been adding to it frantically. The Congress has been hoarding food grains to make the Food Security Act a success by dishing out cheap grains just before elections. The poor would be so grateful and the release of large amounts of grains will being down prices, controlling food inflation and making everyone so happy that they will rush out to vote for the Congress. Naturally, not having proper storage 1,94,502 metric tonnes of grains have been wasted of which 84% was rice and 14% was wheat. The Congress has been forcing Public Sector companies to pay out excessive dividends. NMDC has paid out a record 850% as dividends. Now even the Reserve Bank is being asked to transfer surplus funds to help reduce the fiscal deficit. It is like trying to hide your nakedness with a handkerchief. Which part do you hide?