The Telegraph
Friday , February 22 , 2013
Since 1st March, 1999
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Hint of deficit check in budget

New Delhi, Feb. 21: India’s recent policy reforms have restored optimism at home and abroad and should lead to a revival in growth, President Pranab Mukherjee said here today.

“My government is taking steps to deal with factors responsible for the slowdown. There has been a moderation in core inflation, and recovery in growth is likely,” Mukherjee said in a customary address to Parliament at the start of the budget session.

Growth in the first half of this fiscal has slowed to 5.4 per cent. The government hopes that the recent uptick in tax collection and consumer demand will lead to a reversal. Various economic research institutes see an over 6-7 per cent growth in the year ahead.

Mukherjee said the government was “working with state governments to reach a consensus on the goods and services tax (GST)”. Industry has been lobbying the states and the Centre to work together to kick off the nationwide tax regime, which will replace VAT and a number of local taxes.

The budget session could see a mention of the consensus reached so far on GST, with the Centre agreeing to compensate states for the possible loss in revenues more fully and giving them an option to join later.

He also reiterated that the government would stick to a target of limiting fiscal deficit to 5.3 per cent of GDP (gross domestic product) for this fiscal. The government has trimmed the amount allotted for expenditure to a number of ministries, including defence, to stick to the fiscal consolidation road map. It has also cut subsidy costs by allowing near-market pricing of petrol and diesel and reforming the system of fertiliser subsidies.

Analysts see the President’s message as a hint that the budget will continue to emphasise on fiscal consolidation and cutting subsidies despite favouring a new food security bill, which promises guaranteed food to poor families at low costs.

At present, the government is conducting pre-rollout tests for direct transfer of cash subsidies to targeted poor families instead of offering a subsidy on kerosene, often misused by mixing with fuels.