'How much will your Khata Khat schemes cost fiscally?': Nirmala Sitharaman's poser to Rahul Gandhi

Union Finance Minister Nirmala Sitharaman questioned the ‘lofty promises’ from Congress and asked Rahul Gandhi on plans to meet the fiscal cost of Congress’s promises in its poll manifesto. 

In a series of post on X (formally Twitter), Sitharaman tried to clear the air on opposition claims about fiscal management (especially on debt) under PM Modi’s leadership. Many times, absolute numbers have been compared without considering the GDP growth on which we base the debt calculation, the FM said.  

“I would like to put out a clear picture, unlike @INCIndia, which hides behind lofty promises that are non-transparent and disconnected from reality.  

“Has @INCIndia considered the cost of the lofty promises made in their manifesto? Have they calculated how much the 'Khata Khat' schemes will cost fiscally? Will they borrow substantially for them, or will they raise taxes to fund them?   

“How many welfare schemes would @RahulGandhi shut down to accommodate the fiscal cost of the 'Khata Khat' schemes?” she wrote. 

The FM challenged Rahul Gandhi to answer these questions for the people of India.  

“The truth is that our government's fiscal management is much better than that of the UPA despite facing COVID-19 pandemic in which substantial resources were used for relief efforts,” she wrote.   

She drew a comparison between the UPA rule and the present government, the FM wrote that central government debt, including external debt at current values, grew about 3.2 times from Rs 18.74 lakh crore in March 2004 to Rs 58.59 lakh crore in March 2014. This increase was much greater than the 2.9 times growth from Rs 58.59 lakh crore in FY14 to Rs 172.37 lakh crore in FY24 (RE).  

The FM said the Union government’s debt, which was 52.2 percent of GDP at the end of FY2013-14, was reduced to around 48.9 percent in FY2018-19 through gradual fiscal consolidation. During this period, the fiscal deficit was lowered from 4.5 percent in FY14 to 3.4 percent in FY19. However, due to the COVID-19 pandemic and proactive government measures to protect lives and livelihoods, the fiscal deficit surged to 9.2 percent of GDP in FY21, increasing the Union government’s debt to 61.4 percent of GDP.  

The Interim Budget projects a further reduction to 5.1 percent of GDP in FY25. Similarly, the Union government's debt-to-GDP ratio fell from 61.4 percent in FY21 to 57.1 percent in FY24, she wrote. 

Shedding light on the net market borrowings (G-sec) by the Centre, the FM wrote that it went up by a whopping 4.5 times during the UPA regime, while it went up by 2.6 times under the BJP-led government despite the COVID-19 pandemic.  

“During COVID-19, ‘borrow, spend & even print money’ to reboot the economy was the predominant advice given by the so-called “luminaries” of the opposition parties led by Congress. Ironically, the same people are complaining about high debt levels,” she wrote. 

In her post, Sitharaman claimed that UPA government did ‘window dressing’ to hide its high fiscal deficit without maintaining the integrity of the fiscal numbers. Fiscal deficit for 2008-09 would have been 7.9 percent instead of 6.1 percent as officially stated. The UPA government issued special bonds in lieu of cash subsidies to the oil marketing companies (oil bonds), fertiliser companies, and FCI to keep the official deficit numbers lower. Over Rs 1.9 lakh crore was kept off the books in the five years from FY06 to FY10. Including these off-budget borrowings would have severely increased the fiscal and revenue deficit numbers, read her post.  

The question isn’t just about borrowing; it's also about applying thought on expenditure. Congress is interested in spending on short-term populist measures & there has never been a focus on long-term development, the FM said.    

“There was unsustainable demand stimulus post-2008, unproductive government borrowings, ill-targeted subsidies and govt schemes were further marred with corruption & leakages. We gave targeted relief to the poor, and 80 crore people got free food grains. Moreover, due to the rigorous implementation of DBT, we have saved Rs 3.5 lakh crore from leakages and corruption...” she wrote. 

A cross-country comparison reveals that India has fared relatively well and maintains a general government debt ratio below that of FY2003. "India had a debt-to-GDP ratio of 81% in 2022. This is significantly lower than economies like Japan (260.1%), Italy (140.5%), the USA (121.3%), France (111.8%), and the UK (101.9%) in the same period," she wrote in another post.