Jan 12, 2000|
Govt. plans tax on agri income, debt management policy
The government is contemplating options to tax agricultural income and set aside a part of the proceeds from the disinvestment process to repay outstanding government debt. Apart from this, options are being explored to work out a new government debt management system.
The government has been contemplating measures to tax agricultural income for some time now. However, mainly due to the political implications, no concrete efforts have been made as yet. If the proposal were to go through, the government's tax collections would rise significantly (agriculture accounted for over 26% of GDP in FY99). The measures would also dilute the anomaly that has been existing in the system for a log time whereby rich landlords have escaped the tax net.
The decisions pertaining to government debt are both necessary and important. Total outstanding debt of the government currently stands at 49.6% of FY99 gross domestic product (GDP). The situation is grave, as interest costs currently amount to 70% of the fiscal deficit and 52.2% of the revenue receipts of the central government (FY99). Any slack on the part of debt management could have catastrophic effects on India's economy. The move to repay debt from a part of the disinvestment proceeds will help in reducing India's primary deficit and fiscal deficit. It will also make available more funds that can then be spent on developmental activities.
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