The revenue deficit target for the Tenth Plan (2002-07) has been fixed at 0.8 per cent compared to 5.5 per cent during the previous Plan. The Centre is expected to bring down revenue deficit to 0.5 per cent from 3.7 per cent during the Ninth Plan, while states are to rein in deficit at 0.3 per cent down from 2.1 per cent.
The broad strategy devised by the Planning Commission for fiscal correction includes, increasing budgetary support for infrastructure development through downsizing, reducing non-Plan expenditure on defence, interest payments and non-merit subsidies like higher education & economic services.
According to sources, the Tenth Plan proposes complete privatisation of non-strategic public enterprises within a specified time period. Other efforts to boost revenue includes, raising tax-GDP ratio by broad-basing tax net, bringing service sector under tax-fold and raising user charges on public services such as power, irrigation and public transport.
The fiscal deficit of the Centre slipped from the target of 4.1 per cent in the first year of the Ninth Plan itself at 4.8 per cent of the GDP. This was anticipated as the increase was fully accounted for by the implementation of the fifth pay commission report which cost the government an additional outgo of Rs 51,000 crore. However, the pressure on the fiscal situation continued beyond the stipulated two years and deficit touched 5.7 per cent in 2001-02.
The Commission attributes the poor fiscal situation to a fall in tax-GDP ratio, increase in Plan allocations, interest payments & defence allocations and a failure to curb revenue expenditure.
Revenue expenditure increased from 11.8 per cent in 1997-98 to 13.6 per cent in 2001-02. In the period, interest payment increased from 4.3 per cent to 4.9 per cent, defence expenditure increased from 2.3 per cent to 2.7 per cent, subsidies stayed at 1.2 per cent while other non-Plan revenue expenditure increased from 2.5 per cent to 3.2 per cent.
Revenue receipts on the other hand increased from 8.8 per cent to 10.1 per cent during the Ninth Plan. While direct taxes increased from 3.2 per cent to 3.7 per cent, indirect taxes from 5.9 per cent to 6.1 per cent.
There was, however, a decrease in customs duty collection which decreased from 2.6 per cent to 2.4 per cent during the Ninth Plan.
Non-tax revenue increased from 2.5 per cent to 3.5 per cent in the last Plan.