FRBM Bill Passed; Report On Economy Soon

NEW DELHI, July 29: | Updated: Jul 30 2003, 05:30am hrs
Parliament on Tuesday approved the long-awaited Fiscal Responsibility and Budget Management (FRBM) Bill after finance minister Jaswant Singh promised that there would be no lowering of developmental expenditure. Mr Singh also announced that finance ministry will come out with a quarterly review of the economy before the end of the monsoon session of Parliament.

The bill, which was passed by Lok Sabha in the Budget session, was approved by Rajya Sabha by voice vote. It will now go to President for his assent.

Winding up the two-day debate on the bill, Mr Singh admitted the bill was a hesitant step in containing fiscal deficit as Parliamentary standing committee had diluted some stringent provisions.

The minister added that the quarterly review of the economy to be tabled in Parliament shortly would encompass revenue generation and expenditure details indicating deficits.

The bill, which was first introduced in Parliament in 2001, was approved by Lok Sabha after incorporating most of the recommendations of the standing committee on finance.

The FRBM stipulates that the revenue deficit would be brought down to zero level and fiscal deficit to two per cent in five years by 2008 to bring fiscal consolidation.

Mr Singh also said government will pre-pay Rs 7,500 crore worth of bilateral aid this fiscal besides swapping Rs 38,000 crore high-cost state government debts as part of the fiscal consolidation exercise.

Last year, government had pre-paid $3 billion worth of World Bank and Asian Development Bank loans without causing any ripple to the exchange rate of rupee, stock market and foreign exchange reserves.

The government, he said, had targeted buyback of over Rs 100,000 crore government securities held by banks to bring down NPAs. However, only Rs 15,000 crore worth of government securities were bought back in the first auction held earlier in the month.

The minister, however, said he was not discouraged by the response as the buyback would lead to saving of Rs 750 crore in interest cost annually.

Elaborating on the difficult fiscal situation, Mr Singh said the countrys debt is estimated to go up to Rs 17.79 lakh crore this fiscal from Rs 11.68 lakh crore in 2001-02. This increase, he said, was due to rise in internal debt which had gone up from Rs 800,000 crore to Rs 12.5 lakh crore.

Terming the debt situation, particularly of states, as serious but not alarming, Mr Singh said it was time we should not stretch ourself beyond the size of the mat.

Expressing optimism over the state of the economy, he said the economy had performed well despite worst drought in several decades and global economic slowdown. We have overcome the Gulf war and managed uncertainty in hydrocarbon prices. Inflation was well within the manageable levels of 4.5-5.5 per cent. Currently, it is 4.6 per cent, he said.

The beleaguered Unit Trust of India (UTI) has now become a principal premier mutual fund. Its flagship US-64 scheme commands premium. It shows resilience inherent in Indian economy, he said.

Mr Singh said exports have grown by 19 per cent in the first few months of the current fiscal despite rising rupee. Significantly, exports to China have grown by 106 per cent. Government was able to contain fiscal deficit at 5.9 per cent of GDP last year because of good economic management despite difficult situation, he said.

Participating in the debate, Congress member Pranab Mukherjee said the Centre needs to boost revenue collection but not by arbitrarily raising taxes.

In fact, the endeavour should be to bring more people under the tax net and ensure better tax compliance, Mr Mukherjee said.