 My friend called me yesterday after watching the budget speech and he said that you'd better stop cribbing now You've been talking about Increasing government spending you've been writing about it and finally the government has decided to spend more look at the fiscal deficit You've always been saying increase the fiscal deficit The government is increasing the fiscal deficit to almost 7% of GDP and last year it was almost 10% of GDP You'd better keep quiet now and I thought to myself and I said that yes, sir. He's right Better look at the budget papers and see where all is this spending increasing and let me tell you I realized That what I'd watched in the budget speech at what my friend had watched and what all of you have watched is essentially a magic show because what we saw in front of us was an illusion an Illusion which made us believe that the government is spending more in reality The spending is hardly anything and probably even lower than what we've seen in previous years I'm going to prove it to you. So stay tuned keep watching The reason I spoke about a magic show is because I have always been fascinated with magic shows And I love the way in which through a sleight of hand and through various conjuring ticks Magicians make us believe something which really doesn't happen out there and the budget speech was a bit like that And even the budget papers if you look at it on the face of it are a bit like that You really have to look with a you know a magnifying glass With a fine tooth comb to go through it and you'll be able to discover what the spending really is So let's take the broad numbers here and I'm going to round these off so that you can understand them the Every year a budget estimate is made right that the government is going to spend this much this year And by the end of the year a first cut accounting is done that okay We either didn't spend this much or we spent a little more and this is called a revised estimate And then the next year when we get it The third year's budget you see what is called actual which is the final accounting done Now we know that the revised estimate tells us that the government has ended up spending more than four lakh crores than what it had estimated at the beginning of Beginning of 2020 it spent more than four lakh crore which is about 13 percent extra. This rarely happens Usually what happens is that maybe the spending is off by a percent half a percent Never by 13 percent and it's being said that this is because the government gave a huge stimulus last year because of COVID-19 and when you look at it this 4.1 odd lakh crore which has been spent Additional amount which has been spent last year out of that about three lakh crore has gone to only one particular thing and that is food subsidy food subsidy is three lakh crore and You think that okay, that's pretty good. That means a lot of people were giving additional free food. Yes, that's true A lot of people got extra free free food. Yeah, this year we know that was done. That is one of the big Stimulus packages or big support packages that the government announced. However, there is one more thing out there in this three lakh crore Which is a bit of a sleight of hand and oddly this comes from the transparency so-called transparency The finance minister has included did in this budget now. I'll tell you why that's I'm saying that every year Finance minister since at least the last 10 years have been Understating the food subsidy that they actually The government incurs. How does the food subsidy take place? most of it goes through the food corporation of India which buys crops at minimum support price from farmers and then it distributes it to Russian shops at lower rates at very cheap subsidized rates And of course, there's a cost of also holding buffer stocks all these costs if you take into account The cost of buying crops and cost of selling. There's a loss. There's an implicit subsidy that Food corporation is giving which is A large chunk of the total food subsidy of the government In the last 10 years the food subsidy that has been Given to fci which has been released to fci is only 75 percent Of the total food subsidy that as fci has incurred the cost that it has incurred Now rest of it it was told you have to borrow why have finance ministers repeat successively successive finance ministers done it it's simply because It helps them show a lower fiscal deficit. I'll give you one example last year Which is in the budget of 2020 the finance minister announced that the food subsidy To fci the amount that will give to fci will be about 78,000 crore and the total food subsidy will be about 1,15,000 crore right But it knew that the actual subsidy will probably be much much higher without covid Because the previous year already fci's food subsidy bill was about 1.4 lakh crore and it was being given only 78,000 crore the next year Every year fci's subsidy bill goes up by about 10 and a half percent on an average So you can safely say at the very minimum Its actual food subsidy bill would have been 1.5 lakh crore if not more And what was the government giving it half of that 50 percent of that now that is a bit of a Jugglery accounting jugglery which this year this finance minister has got rid of So the finance minister has said that from now Fci will no longer be taking loans it will get full budgetary support The interesting thing is that that is exactly what happened last year Last year's revised budget tells us exactly that As i'm saying the real food subsidy bill would have been about 1.5 lakh crore even if there had been no covid covid has increased that food subsidy bill i would say by about 50,000 odd crores right and it would have gone to about 2 lakh crore Another 1.5 lakh crore was spent by the government was given to fci to get rid of old dues So this has not gone into the economy as current spending. It is just old dues of fci Which were pending which has been given to fci so that it can pay back the loans It has taken from the national small saving scheme So straight away out of this 4.1 lakh crore again I'm reminding you 4.1 lakh crore additional spending Has supposedly taken place this year out of that remove the 1.5 lakh crore straight away Why because that 1.5 lakh crore was going to go Was for previous dues of fci so we are left with approximately 2.6 lakh crore again As i said if i have to compare like to like then i should actually increase The the budget estimate by about 70,000 crore for simple reason Because that was the actual food subsidy bill that was going to take place Which was not going to be paid Now here's the point when i compare those remove that 70,000 crore what are you left with 1.9 lakh crore right Let's go a little ahead and we now have something interesting to look at which is the fertilizer Subsidy the government's fertilizer subsidy bill has also gone up compared to its estimate by more Than 60,000 crore right about 63 or 1000 crore out of that 50,000 crore is reported to have Been paid as previous dues to fertilizer companies these were spent last year they're Just being paid off this year so effectively again no new spending there just a 13 crore So remove that 50,000 crore again what do you have what you have left is Approximately about 1.4 1.5 lakh crore of actual increased spending in the covid year which is A measly 0.7 percent of GDP just a very minor amount has been paid And extra amount has been paid and by the way most of it a large chunk of it one third of it Went to manrega because as you know migrant workers were going back home and they needed Work there was huge unemployment and something had to be done so manrega outlay was increased Sharply so at least 50,000 crores out of that amount went to manrega another big chunk went For increased transport where special trains were run for migrant workers to go home and to move Things so that was another big cost that was incurred by the government approximately again About 48,000 crore or so so here's the key thing to look at essentially there was no stimulus To the economy no stimulus to demand except for a slight increase in food subsidy not Significant increase in food subsidy and paying off previous dues that is last year's Detail let's look at what is being done next year all right again food subsidy to To both fci and the other Distribution systems that we have in which come under the food subsidy act the food security Act they are going to get an additional 1.25 lakh crore this year out of the extra 4.4 lakh crore that is being spent keep that in mind 4.1 lakh crore was supposedly spent yes Last year additional 4.4 lakh crore is going to be spent extra compared to last year's estimates Not actual expenditure in terms of actual expenditure the just 30,000 crore is being Added keep that in mind right so here's the thing out of the 4.4 lakh crore that is going To be spent additional going to be spent next year 1.25 lakh crore straight away is the Additional food subsidy bill and again as I'm saying if I have to do like to like comparison I have to remember that I have to add 70 to 80,000 crore to previous year's budget estimate Because that was the real subsidy food subsidy bill it's only now that the food subsidy bill Is fully being put on the budget so a like to like comparison is an increase of not more Than 50,000 crore so not even that is not 1.25 lakh crore however let me just take it as that Even here a part of it is likely to be more dues being paid to FCI so some of it might not be Actual spending then comes a huge increase in interest payment about 1 lakh crore additional Interest has been paid because the government had to borrow last year even though its Spending didn't go up sharply it had very little revenue taxes fell sharply so it's borrowing Increased and that means additional 1 lakh crore of interest payment right take that these two The addition on food subsidy and the addition on interest payment take care of half the Additional spending that the government is doing half the additional spending is going away Just in that that is an interesting thing to look at a one-time expenditure of 35,000 crore That is being done on the coronavirus vaccine hopefully it's one time one doesn't know whether The government will have to keep spending that every year and it has to be an annual Vaccine we don't know but still it is it has to be treated as a one-time counter measure It's really not building health infrastructure in that sense so therefore take that into Put that into the picture just 62 62% is taken care of Nearly 62% of the total additional spending is taken care of in just three things one is The accounting change in food subsidy not real change in food subsidy keep in mind Accounting change in food subsidy which is making it look like there's additional spending Interest payment because you have to borrow more and a one-time cost of vaccine that takes Care of 60% the remaining 40% which is again less than 1% 0.8 to 1% of GDP additional Spending that we've taken seeing before pre-covid days. I'm not even comparing it to COVID pre-covid Versus now that additional spending is just about a percent in fact less than a percent of GDP That is going to be spent on gel g1 mission which is safe drinking water a little bit on roads which is NH AI and roadworks some of our it is being spent on building a new Kind of an instant financial institution which is a development finance institution and some As a credit line to msme businessman that is all that is essentially the spend new Spending that you're getting which is less than 1% of GDP That is not going to do anything that is simply not going to help revive the economy And if you believe it is going to then you're Deluding yourself if the Modi government believes that the finance minister believes That this is going to help revive the economy then it is actually trapped in its own illusion in The Maya Jaal it has created the truth is that this was a magic show there's been no significant Increase in spending if at all spending has actually reduced on most heads. 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