After enjoying double-digit gross domestic product growth for decades, the Chinese economy has been bitten by the reality bug. One cannot continue investing in infrastructure without ensuring reciprocal economic growth through productive work. If the latter happens, it would reflect in the government's revenues in the form of more tax earnings.
In India the Centre and state governments have made announcements of aid packages a routine affair without checking the amount that is actually sanctioned or how much is reaching the intended beneficiary. The late prime minister, Rajiv Gandhi's theory that for every rupee sanctioned for the common man only 15 paise reaches him has been proven right. One wonders if even 5 paise reaches the real beneficiary today.
The ever-escalating costs of projects and insistence on the public-private partnership model to make more money will prove dear for the country. The ever-growing financial deficits of several states and also that of the Centre should be seen as the writing on the wall.
The burgeoning non-performing assets of banks is also a cause for worry and shows that many become wilful defaulters by taking advantage of a lengthy and slow legal process.
Soon, India might declare a financial emergency. Only then, it seems, the government would curtail wasteful, unproductive expenses on staff salaries and exorbitant spending on security and travel of political leaders.
One hopes that better sense prevails upon our politicians and they put a cap on deficit financing, which can be relaxed only to deal with natural calamities or if there is a threat to the integrity of the nation or states. Concurrence of the Reserve Bank of India should be mandatory for states if they exceed the deficit limit.
S G Bhokarikar Pune
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