If space permitted, that headline would have been given in full: The Fiscal Consequences of Mr Vajpayee. These are pretty disastrous, if you take the record of both the Vajpayee governments.

Starting with 1997-98 as the base (the year of P Chidambaram's 'dream Budget,' a year that ended poorly with significantly worse numbers than initially projected), and looking at the Budget projections for next year, thus encompassing a period of six years, what we see is that the central government's tax revenue has increased by roughly 60 per cent.

In contrast, the Centre's total expenditure has increased by about 90 per cent. And if you break that up into its two components, then revenue expenditure (i.e. consumption) has increased by over 100 per cent while capital expenditure (i.e. investment) has gone up by only 40 per cent.

And within revenue expenditure, subsidies have gone up by about 180 per cent. These are not one-off numbers, they are not a flash in the pan, they are the accumulated totals of six years of budgeting, and such medium-term trends are not easy to reverse.

So, as I said, the record is pretty disastrous. Expenditure is growing at one-and-a-half times tax revenue. And consumption spending is going up at two-and-a-half times the rate of investment.

Naturally, the deficit has gone out of whack as well: the average over these six years is 5.6 per cent, against just 4.4 per cent in the previous three years.

Now, there are all manner of folks who've emerged from the woodwork to argue that the deficit is not important, that we haven't suffered from running large deficits, that we should be pump-priming the system to achieve faster growth, and that economists should take a hike since 'men are at work' in the finance ministry.

Well, I would worry if these sentiments gained ground.

Because the fact is that India has a serious fiscal crisis, the combined deficit of its central and state governments is now one of the highest in the world, and denying the fact is not going to get us closer to a solution.

Manmohan Singh is an economist, and since the time he left the finance ministry, the fiscal deficit has gone up to two-and-a-half times the size he left behind, rising from around Rs 60,000 crore (Rs 600 billion) to a projected Rs 153,000 crore (Rs 1,530 billion) next year.

If this is what is achieved by 'men at work,' then maybe it's time we tried some women.

Why is the deficit a problem? Because it's financed by borrowings, and as a result the size of the public debt is growing: from around 56 per cent of GDP to 70 per cent or so now.

Because this debt has to be serviced and pre-empts a huge amount of the money that the government collects from ordinary people.

Because this servicing cost, i.e. interest payments, restricts the government's room for manoeuvre when there is a real and urgent reason for spending more.

Because it increases the demand for (and raises the cost of) money and this inhibits economic activity (i.e. growth). And because the government can and should be doing a great many things to trim its size, reduce waste and run a more efficient ship, and since it doesn't do any of these the deficit is in effect financing unproductive government flab.

That's the bad news.

The good news is that the situation might start getting better. Not next year, because the only improvement next year (from 5.9 per cent to 5.6 per cent deficit) flows from assuming Rs 10,000 more of disinvestments.

But certainly over time, because one assumes that the folly of the last Pay Commission will not be repeated.

Because the correction in tariff levels (which has led to customs revenue being flat) is mostly done.

And because the service tax will grow as a revenue weapon, and the service sector (which accounts for half of GDP) will make the contribution to the exchequer that it should have done long ago.

But no correctives can work if the subsidy bill keeps getting bloated at its current rate. The outcome of the battle over fertiliser prices will tell us how much of recent fiscal history is likely to change.

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