| Economic Survey 2001- 02 Published by Government of India |
(I) EXTERNAL DEBT : Economic Survey of 2001-2002, published by the Government of India, deals topic of External-Debt on page 28, para 1.105 as under : "The external debt-GDP ratio has been declining continuously over the years. The ratio improved from 38.7% at end March, 1992 to 22.3% at end March, 2001 and further to 21% at the end of September, 2001. The absolute level of external-debt rose marginally from US $ 99.61 billion at end March, 2001 to US $ 100.38 billion at end September,2001. The share of short-term debt to total debt declined from 10.2% at end March 1991 to 2.8% at end September,2001. The debt service ratio declined from a peak level of 35.3% of current receipts in 1990-91 to 16.3% in 2000-01. The improvement has been the result of concerted and continued efforts of prudent external debt management strategy undertaken by the Government. It is particularly noteworthy that for the first time, the World Bank has classified India as a less-indebted country." Economic Survey of 2001-02, deals Fiscal Issues on pages 29, 30 and 32 in para 1.112, 1.113, 1.121 and 1.122. Above paras of Fiscal Deficit (Internal Debt) are reproduced herewith :- Topic of the Fiscal Deficit dealt with on page 42, para 2.14 and 2.15 of page 46 of Economic Survey of 2001-02. (II) FISCAL ISSUES : 1.112 "The Economic Survey has laid stress on the issue of Fiscal stabilization and reforms for many years. This continues to remain the most difficult of the problems facing economic management in the country. In recognition of this problem the Government introduced the Fiscal Responsibility and Budget Management Bill in Parliament in December, 2000. The Bill mandates the Government to reduce its fiscal and revenue deficits over the next five years to specified substantial levels." 1.113 "The combined fiscal deficit of the Central and State Governments amounted to 9.6% of G.D.P. in 2000-01, causing the combined public debt of general Government to reach 85% of GDP in 2001. Considerable progress has been made over the past ten years in the reform of the Indian tax system in all its aspects, but tax revenue receipts have remained below 10% of GDP throughout the period." 1.121 "The high Fiscal Deficit is often felt to be of only academic interest. It is also argued that high revenue deficits are cause for concern and not Fiscal deficits. This would be true if the non-revenue Fiscal Deficit would result in investment, which provides adequate returns commensurate with the cost of borrowing. This has so far not been the case, with the result that today's fiscal deficit results in tomorrow's revenue deficits. Public borrowing for public investment is indeed justified, and should be undertaken. What is necessary is to ensure that investment is done effectively so that adequate returns are received by the Government. This can be done if appropriate user charges are levied on public services." 1.122 "In summary, the problem of fiscal deficit has to be addressed both on the revenue side and the expenditure side. There has been a popular tendency to focus excessively on expenditure reduction, but this has proved difficult with the rigidity in the structure of Government expenditure. Revenue enhancement now lies more in enforcing compliance in direct taxes and in extending the service tax." (III) GOVERNMENT DEBT : 2.14 "The macro-economic implications of Central Government debt can be gauged in terms of the relative size of the debt and its movement over time. The total outstanding liabilities, comprising internal liabilities and external debt (adjusted for end-march exchange rate) were 61.4% of GDP in 1990-91. As a proportion of GDP, these liabilities follows a declining trend till 1996-97 when this ratio reached 56.4%. This ratio then has increased to 58.1% in 1997-98, 59.65 in 1999-2000, and 62.0% in 2000-2001 (RE). Internal liabilities as a percentage of GDP which were 49.8% in 1998-99, but increased to 49.9% in 1999-2000 and further to 52.9% in 2000-01 (RE). Due to conversion of other liabilities (small savings, deposits and public provident funds) into Central Government securities from 1999-2000, there is sharp increase in internal debt and corresponding decline in 'other internal liabilities'. 2.15 "External liabilities, reported in the budget are based on historical exchange rates and are budgeted higher at Rs.59,593 crore at end-March, 2002 compared with Rs.58,428 crore at end-March 2001. As per cent of GDP, these liabilities to 2.6% of GDP at end-March 2002. However, to get a realistic idea of the outstanding external liabilities, it is appropriate to convert these liabilities by using the exchange rate at the end of the reference period. Accordingly, the outstanding external liabilities at end-March, 2001 were Rs.1,89,990 crore (9.1 per cent of GDP) compared with Rs.58,428 crore in terms of the historical exchange rate (Table 2.3)." The topic of Contingent Liability of Central Government is dealt with on page 47, in para 2.17 of Economic Survey of 2001-02. (IV) CONTINGENT LIABILTIES: 2.17 "Contingent liabilities of the Central Government do not constitute part of the liabilities according to the existing accounting practices. Nevertheless, these liabilities pose fiscal risk as they could be activated depending on occurrence of certain future events. The outstanding guarantees extended by the Central Government are mainly in the form of loan/credit guarantee. Contingent liabilities in the form of guarantees provided by the Central Government are in the nature of implicit liabilities apart from the explicit outstanding liabilities. These contingent liabilities which were Rs.73,877 crore at end-March, 1998 increased to Rs.83,954 crore at end-March, 2000. However, as a proportion of GDP, these outstanding liabilities have fallen from 4.9% in 1998 to 4.4% in end-March, 2000. Total asset of the Central Government (at book value) are estimated at Rs.6,07,525 crore at end-March, 2000. These include purchase of physical and financial assets as well as loans to States and UTs. These assets amount to about 74% of the total internal liabilities (non-RBI)." (V) INTEREST PAYMENT : The topic of Interest Payment is discussed on page '47' in para 2.19 of Economic Survey of 2001-2002. 2.19 "This has been single largest-component of the non-plan revenue expenditure over the years and is the outcome of past borrowings. The rising level of fiscal deficit coupled with the changing pattern of its financing in favour of market borrowings has led to higher interest burden. In the past, a large proportion of outstanding internal liabilities were contracted at very low interest rates. However average interest rates on total Central Government borrowings may remain under pressure in coming years, as debt contracted in the past mature and have to be rolled over at current market rates. This may also ultimately lead to convergence of the average rate to marginal rate. With the interest rates on Government securities becoming market related, the weighted average cost of Government securities rose to a peak of 13.8% in 1995-96 before moderating to 11% in 2000-01. Further, interest rates on public account liabilities (small savings and provident funds) grew significantly. Besides, interest rate provided on contractual saving schemes which seldom exceeded consumer price inflation by more than 3% between 1980 and 1998 rose to a range of 6 to 8%. The incidence of high real interest rates have not only entailed unsustainable debt servicing burden on both central and State Governments but have inhibited economic growth.
Interest payments as a proportion of GDP rose from an average of
3.2% during 1985-90 to an average of 4.1% during 1990-1995 and climbed
to 4.7% in 1999-2000. Similarly, interest payments as a proportion
of net revenue receipts of the Centre rose from an average of little
over 30% during 1985-90 to an average of around 44% during 1990-95
and rose close to an average of about 50% during 1995-2000. The
budget for 2001-2002 has estimated interest outgo at Rs.1,12,300
crore as against Rs.97,342 crore in 2000-01 showing a rise of 15.4%.
The share of interest payments in the non-plan revenue expenditure
is budgeted at 44.9% in 2001-02 as against 44.3% in 2000-01. Interest
payments are estimated to absorb about 69% of total tax receipts
(net to Centre) during 2001-02 somewhat lower than 72% in 2000-01.
As a proportion of GDP, interest payments are budgeted at 4.9% in
2001-02 compared with 4.7% in 2000-01. Interest payments entail
a large claim on public resources and severely impair the Government's
capacity to spend on social sector and infrastructure. (Table 2.2)" |