The AP state government has recently released a document titled “ Annual Fiscal Framework 2003-04” (AFF). This document is ostensibly intended to serve as a basis for formulating the budget after considering the feedback received from the public. Without resorting to financial mumbo jumbo, I would like to draw your attention to the real issues, which get obfuscated by the mirages the government is trying to create.

Across the world there is an increasing trend towards urbanization accompanied by a shift in the nature of economy from agriculture and industry to services. Demographers project that bulk of population growth in developing countries will be in urban areas. In 2002 there were 17 mega cities with 10 million plus population in the world and this figure is expected to grow to 21 by 2015. What is remarkable is the fact that excepting for four of them, all the rest are in the developing world!

align="left">The Union budget for fiscal year 2005-2006 is due in just over two weeks.  This is the period during which a lot of pressure is usually brought to bear on the Finance Minister (FM) to increase budgetary allocations for this or that panacea to transform India and eliminate mass poverty.  With greater continuity and stability in the tax regime the usual excitement about tax rates and the guessing games have been missing in recent years.  Therefore, much of the debate is about allocations, expenditure and fiscal deficits.

The Union budget for fiscal year 2005-2006 is due in just over two weeks.  This is the period during which a lot of pressure is usually brought to bear on the Finance Minister (FM) to increase budgetary allocations for this or that panacea to transform India and eliminate mass poverty.  With greater continuity and stability in the tax regime the usual excitement about tax rates and the guessing games have been missing in recent years.  Therefore, much of the debate is about allocations, expenditure and fiscal deficits.

The Cricket World Cup mania and Iraq war have completely dominated the news over the past six weeks, as economic issues receded into the background. The budget speech of the FM has been all but forgotten. But there is life beyond sports and foreign wars. We need to focus on sensible policies to promote prosperity and combat poverty, in order to enhance real national security.

Local governments have been constitutionally mandated with the enactment of the 73rd and 74th amendments in 1993.  Sadly, the Constitution only provides for over-structured and underpowered local governments. The results are mixed. The role of local governments as schools for democracy is well recognised.  Chittaranjan Das, Vallabhbhai Patel, Jawaharlal Nehru, Subhashchandra Bose, Prakasam Pantulu and several other stalwarts started their political careers in local governments.

Ballooning fiscal deficit is the major problem plaguing the minds of policy makers, economists and thinking citizens.  Shorn of all jargon, fiscal deficit is nothing but the excess of government expenditure over revenues. The finance ministers of the past effortlessly bridged this gap by resorting to two ‘simple’ measures – deficit financing or borrowing.

Once again, the budget season is upon us. For years budget speeches have been romantic exercises with grand gestures and sweeping policy announcements. Sadly, there were no fiscal or monetary incentives to promote desirable goals and pursue worthy policies. And without such incentives, and given the inertia of the political system, most grand gestures remained pious proclamations. The two recurring themes over the past 12 years of budgeting have been reduction of fiscal deficits and the health of capital markets.