Kochi: Economy-watchers are baffled at the way finance minister Dr Thomas Isaac has proposed to go in for massive borrowing from the market to invest in infrastructure without hinting at the ways how he would repay the loans. The opposition, on its part, has charged that the move will end up widening the fiscal deficit in the future.
Dr Isaac has said the government would invest up to Rs 1 lakh into the state’s economy in the next five by borrowing through various means which include issuing bonds and using approved financial instruments.
“The government proposes to borrow huge amounts for projects which are not income-generating,” said KPCC vice-president V.D. Satheesan. “The finance minister, however, has not spelt out the means to repay the loans. This could finally end up widening the fiscal deficit further in the years to come.”
The additional tax receipts alone will not be enough for the government to repay the loans, said C.J. George, managing director, Geojit BNP Paribas. The fine print of the budget suggests that the government will go in for collecting user fees, he said.
The government should have ideally waited for a year, put the government finances in order and approached the market, he said. “However, the combination of Dr Thomas Isaac and additional chief secretary Dr K.M. Abraham commands the confidence of the market,” Mr George said.
A senior government official who refused to be identified said the move to borrow from the market is a deft one but the finance minister is not candid enough about the way he would repay the loans. “The finance minister has made one thing clear: he is confident about improving tax receipts by adopting technological tools and by plugging the leaks. This alone would enable him to wipe out the revenue deficit in two to three years. This could give the government the freedom to judiciously employ future borrowings. I would assume that the finance minister must be planning to repay the debt from using borrowing.” At present, a huge share of the borrowing goes into reducing revenue deficit, leaving very little money in capital expenditure, he pointed out.
