Alls Well, But For Fisc Deficit

New Delhi, Nov 14: | Updated: Nov 15 2003, 05:30am hrs
Even as the economy is set to clock a gross domestic product (GDP) growth rate of over 7 per cent in 2003-04, fiscal deficit management continues to be an area of concern, reveals the mid-year review of economy released by finance ministry on Friday.

Releasing the review, chief economic adviser (CEA) Ashok Lahiri said there is overall buoyancy with likelihood of a good economic growth, comfortable external sector and low inflation rate. The agriculture sector is expected to grow by more than 8 per cent and annual rate of inflation is likely to remain at 4 per cent. The foreign exchange reserves have exceeded $93 billion and growing. Revenue secretary Vineeta Rai added revenue targets for the current year would be met.

Stamp Paper With More Security Features
Our Economic Bureau

New Delhi, Nov 14: Finance ministry said on Friday that government will soon introduce revised security features for stamp paper. The officials, however, held it was the responsibility of the states to deal with the situation arising from surfacing of the stamp paper scam in Maharashtra.
Joint secretary, capital markets UK Sinha on Friday told media persons that the calender for switching over from the existing system to the revised system is also being finalised.
He added that recently the home secretary had convened a meeting with state government officials to collect revenue through modern banking instruments. Karnataka has already initiated steps in this direction, he added.

Fiscal and revenue deficits, however, worsened during the six months ending September 30, 2003. According to the review, fiscal deficit during the first half went up to Rs 81,014 crore which was 52.7 per cent of current years budget estimates (BE). The corresponding figure for the first half of last year was 42.6 per cent. Revenue deficit during the same period at Rs 65,427 crore constituted 58.3 per cent of BE compared to 49.9 per cent of BE in the first half of 2002-03.

The deterioration was on account of increase in non-plan expenditure. At the end of second quarter, non-plan expenditure worked out to be Rs 1,70,211 crore. In absolute terms it exceed the last years figures by Rs 50,046 crore. As much as Rs 32,602 crore was utilised by the government for retiring the National Small Savings Fund (NSSF). This expenditure was reflected in higher fiscal deficit.

The three other major components accounting for the increase in non-plan spending in the first half of the current financial year were major subsidies (increased by Rs 9,744 crore), interest payments (by Rs 2,854 crore) and payment to financial institutions (by Rs 2,381 crore). The outgo towards food subsidy in the first half was Rs 16,006 crore, fertiliser subsidy Rs 6,703 crore and petroleum subsidy Rs 3,730 crore.

Realisation from disinvestment is likely to fall short by Rs 7,000 crore to 8,000 crore in the current fiscal, pointed out finance secretary D C Gupta. The target for the current fiscal is Rs 13,000 crore. The shortfall is likely to be made good by procuring interim dividend and divesting stake in the oil public sector undertakings (PSUs) through public offering route. According to Mr Gupta, no final decision has been taken with regard to offloading of government equity in oil PSUs.

As far as agriculture sector is concerned, based on a good monsoon season, the review forecast an all time high foodgrains output of 220 million tonnes in the current season. It also favoured direct wheat-rice procurement and exports by traders. Foodgrain output is likely to surpass the earlier peak of 212 million tonnes in 2001-02.

Calling for a more stable foodgrains exports policy, the review said there is a need to consider allowing private exporters directly procuring foodgrains from the farmers to encourage competition and efficiency in trade.

Interim Dividend Of PSUs Is Patrimony Of State: FinMin
Our Economic Bureau

New Delhi, Nov 14: The finance ministry (FinMin) on Friday defended the governments decision to raise resources through interim dividend route from public sector oil companies.
Interim dividend is patrimony of the state, government is the owner, it is like rent accruing to the owner, a senior Finmin functionary said. It is a normal procedure for PSUs to part with profits in favour of the state. Oil PSUs had last year paid Rs 2,687 crore interim dividend to bail out government finances. This year, they may pay Rs 3,500 crore. ONGC had paid Rs 2038.88 crore interim dividend, IOC Rs 319 crore, Gail Rs 170.83 crore and BPCL Rs 39.72 crore.

Full story
It added the record output projections were based on the basis of first advance estimate for kharif and good rabi season prospects with comfortable water levels in the 71 major reservoirs of the country.

Sugarcane, however, is the only major crop likely to face a decline in production during the current year, mainly because of drought conditions in the major growing areas of Maharashtra.

Elaborating on the structural reforms, the review said a reform of regulatory regime was essential not only for accelerating growth of investment and output but also for promoting adequate employment, enhancing efficiency and maintaining macro-economic stability.

It identified two major areas for tax reforms as introduction of value-added tax system and removal of inter-state trade barriers by eliminating central sales tax.

Turning to infrastructure development, the review expected many changes to unfold as a consequence of the Electricity Act.

It is expected that there will be much more power trading and better utilisation of existing capacities in generation. Many states have embarked upon structural reforms in distribution. These are expected to reduce power theft and improve recoveries, the review said.

On the external sector, it said the turnaround in the current account from a surplus to a deficit and deceleration in export growth in recent months were the source of concern.

Simply trying to relate the export growth deceleration to the real effective appreciation the rupee misses out on the important issue of the collective growth and the benefits of floating exchange rate regime.

A stable export policy can be sustained only if domestic price of foodgrain is properly aligned with the international prices, it said adding there was also need to consider allowing private exporter directly procuring foodgrain from farmers to encourage competition and efficiency gain.