Voice of Electricity Workers April-June 2002 Index
RSS PAPER ORGANISER OPPOSE FOREIGN BUDGETARY INTERVENTION IN STATES
There is a parallel economic policy being contemplated in addition to the budgetary provisions advocated by the Finance Minister, sources in the north block reveals. These second-string measurers of "complete liberalisation", reportedly involve granting permission to certain federating states of the Indian Union, to enter into monetary and policy alliances with foreign countries. In a revolutionary departure from established fiscal procedures, the new policy envisages permitting the states to seel aid from foreign countries to meet their budget deficits.
Thus far , the revenue deficits of the state governments were met by grants from the Union government and overdraft facilities made available to these state governments by the Reserve Bank of India. The budget deficit is thus financed by the overdraft from the RBI. The overdraft limit for each state is determined through consultation between the respective state government, the ministry of Finance and the Planning Commission. Under the new policy, some states are being allowed to supplement the overdraft from the RBI with Structural Adjustment Loans from the World Bank and the Union government's grants with grants from foreign countries.
These proposals have caused much concern and debate in the light of the implicit violation of Indian sovergnity in the event that a foreign government is allowed to take over the economic responsibilities of the Union Government to the States. Such provisions will open a whole new chapter of centre-state relations and significantly undermine the government of the Union of India: the Centre's monopoly on monetary policy and external affairs stands negated, if this proposal is implemented.
While the department of economic affairs in the Ministry of finance believed to have given go-aheads to the concerned State-Governments to negotiate with the world Bank and some foreign countries under the instructions from the Finance Minister, some members of the Union Cabinet claimed ignorance of any such developments.
Negotiations between foreign union governments, and some Indian State governments have already reached an advanced stage. Some of these state governments are even reported to have begun implementation of "pre-conditions" laid down by these donor countries. This has caused a lot of anxiety in informed circles about the motives and directions of this new policy initiative.
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