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Ominous portents
The budgetary arithmetic seems to have gone awry, judging by the desperateloud thinking in the North Block. The finance minister had proposed to bringdown the fiscal deficit (including small savings loans to the states) to 5.2per cent of the GDP this year from 5.9 per cent last year. But this modestdeficit-reduction target seems to be eluding him. True, the unforeseenKargil war skewed the fiscal arithmetic. But war expenditure does not seemto be the nub of the problem. In any case, business has let it be known thatit is willing to bear a one-time war impost. On the expenditure side, it isknown, the growth of subsidies has not slowed down as projected. Aggregatetax revenues (net of the share of the states) are, presumably, not rising asexpected. In short, fiscal consolidation has proved to be far from thefacile exercise assumed by the 1999-00 budget. The problem now is, how tofill the expanding hole in the budget?The search is on for soft options. The fund-strapped fisc wants to dip intothe oil (diesel and petrol) cess, estimated to garner Rs 5,800 crore thisyear: a half of this amount was committed by the finance minister tonational highway development; and the balance to rural development and therailways. But there is no independent authority to allocate collections fromthe cess. Reportedly, the finance ministry is making sure that a roaddevelopment fund, which will to stake a claim on collections from the cess,is not set up. Allocations to others too will be throttled. So, what happensto highway development, and the Prime Minister's dream of north-south andeast-west corridors?. It is one thing to tap funds meant for ruraldevelopment (there is no well-defined constituency to articulate protest);but quite another to shortchange the railways: robbed Peter will make Paulpay higher fares and freight. This apart, should Parliament let thegovernment get away with funds raised for specific purposes? A cess, be itnoted, is not a tax. Fiscal consolidation was premised, inter alia, on privatisation. But insteadof using the realisations in support of declared objectives, equitydisinvestment receipts are proposed to be used to narrow the revenue gap.Worse, generating stations of NTPC are to be sold off piecemeal. What willNTPC be without its generating units? Besides, sales realisations will bebelow the optimum in the absence of power tariff reform. But the governmentseems too desperate to think things through. This is ominous for the nextbudget, barely three-and-a-half months away. Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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