Sir,

The Moody's (rating Agency) investors agency has double downgraded India's Sovereign rating from investment to speculative grade which is charitable otherwise India had entered into a debt trap in view of admitted facts and figures of Budget 1998.

The Central Government had estimated Rs.1,52,000 crores as revenue receipts for year 1997-98 in 1997 budget but the Central Government could recover revenue receipts of only 1,38,514 crores out of which Rs.65,000 crores were paid towards interest payment and Rs.45,000 crores towards salary and arrears of salary during year 1997-98.

The Central Government Revenue receipts and non-debt capital receipts for year 1998-99 are estimated at Rs.1,76,902 crores but non-plan expenditure is estimated at Rs.1,96,105 crores. Every Government is expected to spend all non-plan expenditure from revenue income but 1998-99 budget shows that the Government is to borrow Rs.20,000 crores for normal spending of interest payment. Defence salary, Pensions subsidies and grants. The plan expenditure is entirely spent from borrowed funds.

The only interest payment liability was Rs.26,000 crores in 1991-92 which has increased to Rs.75,000 crores for year 1998-99 due to reckless borrowing by the Government. The aggregate domestic liabilities - debts was Rs.2,82,733 crores in 1991 has increased to Rs.6,16,093 crores in 1997 (Budget Estimates). For year 1998-99, Central Government will pay Rs.75,000 crores towards interest payment out of revenue receipts of Rs.1,76,902 and there will be only balance of Rs.1,01,102 crores for defence salary, pension, subsidies and grants which is not sufficient to discharge liabilities and Rs.20,000 crores will be spent from the borrowed funds. It may be noted due to concessions given by United Front Government; the Central Government salary bill is to increase every year to the extent of Rs.13,500 crores.

Fiscal deficit which was Rs.65,000 crores in 1997-98 is estimated at Rs.91,000 crores for year 1998-99, a phenomenal increase of fiscal deficit of Rs.26,000 crores in a single year.

The proposed Import duty is reduced from 8% to 4% due to pressure of industrialists and businessmen and powerful agriculturists lobby nullified the levy of Re.1/- per kilo and thereby the Central Government lost Rs.6,000 crores even before passing of the budget.

Inspite of above admitted figures and concessions given in the budget, Yashwant Sinha, the Minister of Finance, tries to put up a brave face by saying that sanctions will be weaker in the course of time and rating agency has erred on the side of over-caution.

VASANT J. DESAI
AHMEDABAD.

DATE : 07/07/1998.
TIMES OF INDIA.