UPA's Vote-On-Account: What next govt will inherit?

Large expenditure cuts and the largesse of PSUs who have given special dividends will ensure the finance ministry meets the fiscal deficit target of 4.8 percent of GDP this year. Next year will be not be as simple as the full burden of the UPA's two's flagship schemes will be felt in budget 2014-15. In the second part of CNBC-TV18’s vote-on-account series, Aakansha Sethi takes a look at the fiscal challenges the next government will inherit.

Chidambaram will seek parliament approval for expenditure for the first quarter of FY15 on 17th February, his vote on account will also project revenues and expenditure for the entire year. Chidambaram has proposed a fiscal deficit of 4.2 percent for FY15, a tall ask for the next government.

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Arun Shourie, Former Divestment Minister said, “Government debt has increased three fold- subsidy management is the key.”

Subsidy management will not be as simple- especially because the new regime will inherit both controversial and politically sensitive measures. It will be interesting to see if the government can bite the bullet and reduce the burden on the food bill, by hiking the fixed price for rice wheat and coarse grains at Rs 3,2,1 respectively-which won’t require legislative action. The age old remedy of expenditure management would be a lasting solution, but will depend on the political strength and commitment of the new government.

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Aakansha Sethi

Reporter|CNBC-TV18

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“If there is an AAP government nothing will be possible, Modi has been a CM so can translate programs into action,” he added.

The last two years have seen a 20 percent cut in plan expenditure. It will be imperative to increase plan expenditure to enable infrastructure spending and a push to growth. A new regime will also want to introduce its own flagship schemes. The full budget for FY15 will bring clarity on the road ahead for fiscal consolidation and expenditure management.