New Delhi: Refraining from tinkering with tax and duty rates in the interim budget, acting finance minister Pranab Mukherjee on Monday made a huge allocation of Rs30,100 crore to government’s flagship rural employment programme and many other schemes in a bid to counter the economic recession.
Despite the fact that revised estimates for tax collections during 2008-09 is projected at Rs6,27,949 crore as against the budget estimate of Rs6,87,715 crore, the minister resisted the temptation of giving sops since it is an interim budget with general elections just a few months away.
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Aiming at enhancing expenditure on schemes to provide employment and lift the economy, the interim budget for 2009-10 has planned a total expenditure of Rs9,53,231 crore comprising Rs2,85,149 crore in plan and Rs6,68,082 crore in non-plan spending.
Also Read Interim Budget 2009-10 (Full Coverage)
To counter the negative impact on exports due to the global economic crisis, the interest subvention of 2% on pre and post shipment for certain employment sectors is proposed to be extended.
Also Read Interim Budget 2009-10 | Highlights (PDF)
Like the National Rural Employment Guarantee Scheme (NREGS), the Bharat Nirman scheme gets a massive injection of Rs40,900 crore in the coming year.
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He said since the scope for revenue mobilization is bound to be limited in a period of economic slowdown, any increase in plan expenditure will increase the fiscal deficit.
“Indeed, we may have to consider, the additional plan expenditure from 0.5% to 1% of GDP and gear up our systems accordingly,” Mukherjee, who holds the additional charge of finance, said in his 90-minute speech.
Also Read Interim Budget 2009-10 | Full speech
In the budget estimates for 2009-10, the Sarva Siksha Abhiyan has been given Rs13,100 crore more while the Mid-day Meal Scheme will get Rs8,000 crore, the Integrated Child Development Scheme Rs6,705 crore and the Jawaharlal Nehru Urban Renewal Mission will get an additional Rs11,842 crore.
Among other schemes that got increased allocation are Rajiv Gandhi Rural Drinking Water Mission (Rs7,400 crore), Total Rural Sanitation Programme (Rs1,200 crore) and National Rural Health Mission (Rs12,070 crore).
Mukherjee said the proposed provisions are appropriate for a vote-on-account but he pointed out that planned expenditure for 2009-10 will have to be increased substantially at the time the presentation of the regular budget, if the economy has to be given a stimulus it needs to cope with the global recession that is likely to continue through the year.
The budget makes a provision of Rs95,579 crore for major subsidies including food, fertilizer and petroleum.
For the coming year, gross tax revenue receipts at the existing rates of taxation are estimated at Rs6,71,293 crore, of which the Centre’s net receipts have been projected at Rs5,00,096 crore.
With revenue expenditure estimated at Rs8,48,085 crore, the revenue deficit amounts to 4% of the GDP. Fiscal deficit is estimated at Rs3,32,835 crore which is 5.5% of the GDP.
This would be lower than in 2008-09 but higher than would be appropriate under normal circumstances, he said.
“However, conditions in the year ahead are not likely to be normal and therefore the high fiscal deficit is inevitable. We will return to FRBM targets once the economy is restored to the recent trend growth path,” he said.
Mukherjee said extraordinary economic circumstances merit extraordinary measures. “Now is the time for such measures. Our government decided to relax the Fiscal Responsibility and Budget Management (FRBM) targets, in order to provide much needed demand boost to counter the situation created by global financial meltdown.
“Indeed, depending on the response of the domestic economy and the revival of the global economy, there may be a need to consider additional fiscal measures when the regular budget is presented by the new government after the elections. However, the medium term objective should be to revert to the path of fiscal consolidation at the earliest,” he said.
Touching on the revised estimates for 2008-09, he said the total expenditure has been revised to Rs9,00,953 crore against Rs7,50,884 crore, an increase of Rs1,50,069 crore.
The plan expenditure for 2008-09 was placed at Rs2,43,386 crore in the budget estimate which has now gone up to Rs2,82,957 crore in the revised estimates.
The additional plan spending of Rs39,571 crore is on account of increase in the central plan by Rs24,174 crore and an increase of Rs15,397 crore in central assistance to state and UT plans.
On the non-plan side, the additional Rs1,10,498 crore in the revised estimate is accounted for by an increase in expenditure of Rs48,863 crore on fertilizer subsidy, Rs10,960 crore on food subsidy, Rs15,000 crore on agriculture debt waiver, Rs7,605 crore on pensions and Rs5,149 crore on police. An additional amount of Rs9,000 crore has also been provided for in defence expenditure.
In keeping with the recent trend, the actual tax collections during 2007-08 exceeded the revised estimate for the year both for direct and indirect taxes.
However, for 2008-09, the revised estimate for tax collection is projected at Rs6,27,949 crore as against budget estimate of Rs6,87,715 crore.
This shortfall is primarily on account of government’s proactive fiscal measures to counter the impact of global economic slowdown on the Indian economy, Mukherjee said.
A substantial relief of about Rs40,000 crore has been extended through tax cuts, including a fairly steep across-the-board reduction in central excise rates in December last. Despite this, it is expected that the tax collections will exceed last year’s collection.
Taking into account the variations in receipts and expenditure, the current year expected to end with a revenue deficit of Rs2,41,273 crore as against budgeted figure of Rs55,184 crore.
Accordingly, the revised revenue deficit stands at 4.4% of GDP instead of 1% in the budget estimates. Similarly, the fiscal deficit of 2008-09 has gone up from Rs1,33,287 crore in the budget estimate to Rs3,26,515 crore in the revised estimates.
The revised fiscal deficit is estimated at 6% of the Gross Domestic Product (GDP) as against the budgeted figure of 2.5%.