The government is turning to the CAG and asking where is Rs 1.76 lakh crores post the failure of 2G spectrum auctions. The government had budgeted for Rs 40,000 crores in spectrum auction but has managed to garner only Rs 9400 crores from the auction of 2G spectrum. The CAG (Comptroller Auditor General) had estimated a loss of Rs 1.76 lakh crores in the 2G-spectrum allocation done under the then Telecom minister A.Raja who was in Jail for corruption on the allocation process.
The government is questioning the CAG on how the figures were arrived at rather than turning inwards and wondering where everything is going wrong for it. In fact the honest Indian taxpayer should turn to the government and ask where is the Rs 19 lakh crores that the government has borrowed from the market in the 2008-09 to 2012-13 period gone. The government resorted to fiscal stimulus to pump prime an economy that was feeling the heat of a credit bubble burst in 2007-08.
The pump priming has not worked as seen from the fall in GDP growth rates despite rise in fiscal deficit. Table 1 gives the borrowings, fiscal deficit ratio and GDP growth for 2007-08 to 2012-13 period.
The stark difference between 2007-08 and 2012-13 is there for everyone to see. In 2007-08 the net market borrowing was Rs 1,30,000 crores for financing a fiscal deficit of 2.5% of GDP and GDP growth for that year was 9.3%. In 2012-13 net market borrowing is expected at Rs 513,000 crores to finance a fiscal deficit of 5.3% of GDP and GDP growth is expected at 5.8%.
The government has a lot to answer for the money it has spent pump priming the economy especially as the pump priming has actually resulted in GDP growth falling by 3.5% from levels seen in 2007-08.
The money the government has spent has definitely not gone for productive purposes. Around half of the money the government has borrowed since 2008-09 has gone for paying interest on debt. The other half of the money the government has borrowed should have helped improve economic growth. The fact that GDP growth has come off sharply since 2007-08 has placed a question mark on whom the fiscal pump priming has benefitted.
The answer to the beneficiaries of fiscal pump priming is clearly the businessmen, politician and bureaucrat nexus, which has seen its wealth, grow many folds over the last five years. Most of the investments of corrupt India are in land and property, the prices of which has gone up manifold since 2008-09. Ironically land and property prices have gone up at a time when economic growth is trending down and when capital markets are down. Sensex and Nifty are down over the last five years and rise in property prices is definitely not due to wealth effect.
The failure of the 2G-spectrum auction is not due to CAG, it is due to the finances of Telecom companies. Telecom companies are reeling under debt incurred in 3G auctions, where they paid Rs 68,000 crores in 2012. Hence incurring more debt for spectrum was not feasible. Telecom companies are answerable to lenders and shareholders and business loss is written off by stakeholders.
The government has incurred heavy debt for pump priming the economy and the results are not showing. The government is answerable to its people who are its stakeholders. The people cannot write off the country as they live in the country. The government instead of blaming its own agency for an auction failure should set about answering the people of the country on where its money of going.