Jan 31, 2000|
Government puts fiscal deficit at 5.5% in FY00
The government has projected the fiscal deficit at 5.5% of GDP for the fiscal year 2000 as against the target of 4% of GDP (revised method). In absolute terms, the fiscal deficit is set to exceed the target by Rs 300 bn.
The centre's admission that the fiscal deficit is likely to be 150 basis points above the targeted figure will not come as a surprise to many. This is mainly due to optimistic projections made by the government while presenting the budget for the current financial year. The government is likely to miss the target for revenue collections from tax and disinvestment. At the same time, the expenditures have exceeded the budgeted amounts significantly. This has led to the grim fiscal scenario that the government is now facing.
The fiscal situation needs to be corrected in view of the government's target to limit fiscal deficit to 2% of GDP. To achieve this efforts would have to made to increase revenues and limit expenditures. On of the measures on the revenue side could be to implement a more effective system of minimum alternative tax that has the software sector in its ambit. This would widen the tax base and improve the government's tax revenues. Also, the disinvestment process needs to be stepped up in order to unlock the government's resources.
On the expenditure front, measures should be taken to control the government's administrative expenditure. Also, subsidies need to be cut down.
India's fiscal problem needs to be tackled from both sides – revenue and expenditure. The success of such measures would however depend on the strength of the political will. This will continue to remain as the weak point in the process of fiscal correction.
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