Get Rid of FRBMA2003 Now

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Recently Nitish Kumar declared he is frustrated by the lack of an alternative narrative by the opposition against the BJP.

The alternative narrative should be a united opposition to the Fiscal Responsibility and Budget Management Act 2003 (FRBMA2003).

Time is running out and it seems undignified to keep pressing the logical arguments. Today Siberian Times reported massive new blow holes spewing methane into the atmosphere. Siberia is the biggest largest natural gas depository on earth. 700 blow holes are ready to explode, with further billions of tonnes of methane with a global warming potential 23 times that of carbon dioxide waiting in the wings ready to go up in the air.

The state of Bihar has 119 million people. It is 95% agricultural. Bihar's Janata Dal (United), JD(U), ruling party spokesperson K.C. Tyagi recently rightly declared: "there is very little difference between the economic reforms and policies and liberal ideas of (Congress finance minister) P. Chidambaram and (BJP finance minister) Arun Jaitely, except for their dress code. One wears a lungi and the other wears a safari suit, that's all."

Because of FRBMA2003 the 2017-2018 health budget in Bihar, the third largest state in India with 119 million population, was cut by 15.5% to Rs 7002 crores, an outlay of a mere Rs 58.8 per person.

Because of FRBMA2003 the agriculture and horticulture sector, the backbone of Bihar economy, and the key to ecological survival of humanity, are devastated.

In the EU as in India, austerity is neither delivering climate change mitigation nor social stability. In India, the ideologically motivated fiscal austerity monetary theory out of the G20 is a noose round the neck of all the three tiers of government of the country. Union, State and Gram Panchayats are seeing massive cut backs in their budgets on an unprecedented scale.

K.C. Tyagi further said: "Modi doesn't want an argument on economic issues…". Friends in the JD(U) are right in their full-on attack on Congress as well as the BJP.

We need to win back the economic argument from the elite minority class running the country and the world for their own selfish needs. If we don't, the 2019 Parliamentary elections could end in total disaster and there will be no money for community action to adapt to climate change that is going to hit quite soon now with quite devastating force. In any case, since when are the present droughts, floods and agricultural labourer and women's miseries not enough to get the FRBMA2003 overthrown even before full blown runaway climate change?

If needed we can use the insights from MMT from the University of Missouri Kansas City (UMKC) in the US to find the right theoretical underpinnings to suit our needs and get rid of the crippling rightist BJP/INC consensus. MMT explains logically why and how ad hoc monetisation of fiscal deficit as the Congress Party of old used to practice in India is nothing but common sense, because it is how money actually works. Money is not as a constraining factor for an economy but rather the facilitator of any activity that government wishes to undertake limited purely by real world resource availability. "MMT proclaims itself with some justice to be 'the last progressive left standing'."

MMT helps policy makers counter austerity ideology and "remove unnecessary self-imposed institutional constraints (whether stemming from regulation or neo-classical theory) on monetary and fiscal policy." In the place of FRBMA2003 we would have a 'functional finance' approach.

"Functional finance advocates the use of monetary and fiscal policy based on the observable needs of the real economy, rejecting the idea that the fiscal position of the government as such is a relevant policy objective." "From the vantage point of economic analysis, government can spend by crediting accounts in private banks, creating banking system reserves. Any number of operating procedures can be adopted to allow this to occur even in a system in which responsibilities are sharply divided between a central bank and a treasury."

In India, we have no divide at all between the Reserve Bank of India (RBI) and the Finance Ministry. Recently RBI monetised the state electricity board debts. The centre is also monetising the non-performing loans of the State Bank of India (SBI) and others; and the Bankruptcy and Insolvency Rules 2016 are monetising other loans too. Thus ad hoc monetisation of deficits albeit of state public sector enterprises and private sector corporations and not of government fiscal deficits, is proceeding. However, it is wrong to only credit accounts of private banks for industrial activities that contribute not one job to job creation and that promote runaway climate change to which agricultural labourers are especially exposed. Rather we must credit all tiers of government for public spending according to functional needs for full employment and health and climate change adaptation.

A workshop at the Ministry of Finance should be held to draw up a common manifesto for the opposition against the FRBMA2003.

Anandi Sharan was born in Switzerland, lives in Bangalore, and worked in Araria District in 2016. She mainly writes about India and how we need a better money policy to help agricultural labourers and women especially to adapt to man-made climate change. 


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