The Telegraph
Since 1st March, 1999
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FM vows to contain fiscal deficit

New Delhi, Sept. 9: Finance minister P. Chidambaram has admitted there are concerns over the rising rate of government expenditure but vowed to rein in fiscal deficit through a combination of better tax collection and expenditure management.

“I know there is some concern about the rising expenditure,” Chidambaram said, but added that he was confident fiscal deficit would be contained at the budgetary target of 3.8 per cent of GDP and revenue deficit of 2.1 per cent of GDP this fiscal.

“It may be noted that the increase in expenditure is largely attributable to the sharp rise in plan expenditure,” he said. Plan expenditure grew 21.6 per cent during the first four months of this fiscal over the corresponding period of the previous year, Chidambaram said.

Most departments of the central government have done well in quickening the pace of plan expenditure, Chidambaram said. Non-plan expenditure grew by 22 per cent during April-July 2006 year-on-year, he said and attributed it to transfers to states, carry forward of VAT compensation claims, increase in interest payments, increase in subsidies and increase in defence services expenditure.

For the Congress-led government, which has been fire-fighting inflation flareups in recent months, one main cause for concern is that its revenue deficit for the first quarter of this financial year has shot up to Rs 70,675 crore or over 83 per cent of the budgeted revenue deficit for the whole year.

Simply stated, this means, the government has spent far more than it should have. In fact, the revenue deficit it should have run up in two to three quarters has been run up in one single quarter.

Spending by the ministries of rural development and elementary education and literacy in the first quarter of 2006-07 were more than double its spending in 2005-06 spending. The health ministry spent two and a half times of what it had spent in the first quarter of 2005-06. These three ministries between them spent some Rs 10,966 crore more during April-June 2006 than they had done during the same quarter in 2005.

Chidambaram, however, pointed out that the government has collected 32.28 per cent more taxes (excluding service tax and excise duty) at Rs 77,027 crore during the first five months of this fiscal against Rs 54,000 crore in the corresponding period of the previous fiscal.

While direct taxes grew by 50.30 per cent at Rs 42,917 crore during the April-August, 2006 year-on-year, customs duty among indirect taxes rose by 34.05 per cent to touch Rs 34,110 crore.

Corporation tax increased by 70.37 per cent at Rs 22,587 crore during the first five months of this fiscal against Rs 13,258 crore. Income tax, including fringe benefit tax, securities transaction tax and banking cash transaction tax, rose by 32.91 per cent at Rs 20,330 crore against Rs 15,296 crore.

Chidambaram told newspersons non-tax revenues are also encouraging and there has been an increase of 11 per cent at Rs 13,696 crore compared to Rs 12,340 crore in the corresponding period of the previous year.

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