How Will Congress Fund 'Khata Khat' Schemes, Sitharaman Asks

As India votes on Monday for the fourth phase of the Lok Sabha 2024 polls, the debate on the fiscal prudence of electoral promises has shifted online.

Following a campaign speech by Congress leader Rahul Gandhi in Raebareli, Uttar Pradesh, on the party's proposed Mahalakshmi Scheme, Finance Minister Nirmala Sitharaman posted on social media platform X (formerly Twitter) and asked if the Indian National Congress had considered the cost of their electoral promises and how they hoped to fund them without increasing taxes or borrowing heavily.

"Has INC 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?" she posted in a thread.

This is in reference to the Congress leader's speech, where he said female beneficiaries of the Mahalakshmi scheme will receive Rs 8,500 in their bank accounts every month in a "Khata Khat" fashion starting July 1.

"How many welfare schemes would Rahul Gandhi shut down to accommodate the fiscal cost of the 'Khata Khat' schemes?... Here’s a challenge to him to answer these questions for the people of India," she posted on her personal account.

Sitharaman claimed that the government's fiscal management is much better than that of the UPA regime, despite the pandemic, where substantial resources were used for relief efforts.

The central government’s debt, which was at 52.2% of GDP at the end of FY14, was reduced to around 48.9% in FY19 through gradual fiscal consolidation. During this period, the fiscal deficit was lowered from 4.5% in FY14 to 3.4% in FY19, she said.

During the pandemic, the government's fiscal deficit surged to 9.2% of GDP in FY21, increasing the central government’s debt to 61.4% of GDP, she added. The government is pursuing a balanced approach to fiscal consolidation while sustaining economic growth to bring this down, according to Sitharaman.

"This strategy reduced the fiscal deficit from 9.2% of GDP in FY21 to 5.8% in the revised estimates for FY24. The interim budget projects a further reduction to 5.1% of GDP in FY25. Similarly, the central government's debt-to-GDP ratio fell from 61.4% in FY21 to 57.1% in FY24," she said.

Sitharaman alleged that the Congress-led UPA government had a higher underlying deficit than the budgeted deficit, which was hidden by 'window dressing’.

"Fiscal deficit for 2008–09 would have been 7.9% instead of 6.1% as officially stated," she said. According to her, the UPA government issued special bonds in lieu of cash subsidies to the oil marketing companies (oil bonds), fertiliser companies, and Food Corp. of India to keep the official deficit numbers lower.

Referencing off-budget borrowings, she said, "Over Rs 1.9 lakh crore was kept off the books in the five years from FY06 to FY10... The UPA government issued oil bonds worth Rs 1.48 lakh crore (1.9% of GDP) to control oil prices until 2014, effectively shifting the burden to future generations."

Sitharaman stated that, owing to these bonds, the Modi government inherited an outstanding debt. It has repaid Rs 1.43 lakh crore, including Rs 44,650 crore in principal payments and the rest as interest, between 2014 and 2024.

"Our government has prioritised transparency and accountability in its budgeting practices, thereby enhancing the credibility and robustness of its fiscal numbers," she said.

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