- Effects of Fiscal deficit on local industry
- Effects of Fiscal deficit on credit cycle & Government revenue
- Effects of Internal borrowing on fiscal deficit
- Effects of Fiscal policy & external borrowing on credit policy & banking system
- Effects of Fiscal deficit on disinvestment policies & reduced social spending
- Effects of Fiscal deficit on anti-social industries
- Effects of Taxation system & high denomination currency
- Effects of Fiscal deficit on credit cycle & farmers suicide
Let us say our economy is like a multi-storied building. The overhead water tank on the roof is the Treasury. The floors from the top downwards are the various heads of government expenditure in order of priority.
There are pipes leading water down from the overhead tanks to the various levels - their taps are dry. On investigating, we realize that the overhead tank is only half full – and the lower levels will not get any water unless the tank fills completely. This gap in the overhead tank is the fiscal deficit.
We check the main reservoir on the ground and find that it does contain a lot of water. The pump is running at full speed. The pipes, which lead this water up into the overhead tank – basically, the systems of taxation - are so incredibly twisted, choked and corroded that they have developed hole at many places. A lot of water is leaking out of these pipes and that is why the overhead tank just doesn’t get filled up! This shortage in the overhead tank is the fiscal deficit.
And all this water that is flowing out of the system is accumulating outside the building. Though it started out as a small muddy pond, it has today assumed the massive proportions of an ocean. This, dear citizen, is the parallel economy and the water leaking out of the system to evade taxes is the black money.
At some point, the common citizen gets too thirsty to wait any longer and has no option but pick up his bucket and go to the ocean outside. The water is dirty with all kinds of dangerous germs – but is abundant and tempting; we have no choice, do we?
An outdated taxation system encouraging evasion and fuelling the parallel economy, a perpetually cash-strapped government, reduced social expenditure causing suffering for the impoverished millions and unfavorable conditions for business and industry…
That then is the economic reality of our beloved nation…