The smoke signals coming from North Block point to a soft budget, thanks to the exceptional state of government finances this year.
NEW DELHI: With the 2007-08 Union budget less than a week away, the guessing games have begun on what the finance minister will do on February 28. The smoke signals coming from North Block point to a soft budget, thanks to the exceptional state of government finances this year.
The centre’s net collections of direct taxes, including income-tax, corporation tax, fringe benefit tax, securities transaction tax and the banking cash transaction tax, have grown by a massive 41.2% till January-end, outpacing the targeted growth of 27.5% in the current financial year.
Even better, the spending reports coming from various ministries show large savings on government expenditure, especially in several plan schemes that have been given large outlays, and in interest costs.
“This fiscal bonanza has placed the finance minister in a very comfortable position,” says a ministry official.
This financial cushion, economists said, provides P Chidambaram with an opportunity to present a “soft” budget. The focus will thus be on lessening the tax burden and stepping up investments in priority sectors.
“Given the dramatic improvement in finances, I expect the finance minister to rationalise taxes and raise public investment in rural infrastructure”, says Rajiv Kumar, director and chief executive at ICRIER, an economic think-tank.
Many economists also believe the finance minister has the opportunity to lower the centre’s market borrowings and avoid crowding out private borrowers. This will ease pressure on interest rates. Many economists, in their pre-budget consultations with the finance minister, had in fact suggested that the government should cut down its borrowing programme during the last quarter of this financial year itself. “Over the last couple of years, the finance minister has worked hard at leading the government’s financial recovery. This has brought us to a stage where legally-mandated fiscal consolidation targets do not appear daunting any longer”, an official said.
Although the finance minister has to meet the Fiscal Responsibility and Budget Management Act targets for the next year, that should be a cakewalk for him under the present comfortable circumstances. Finance ministry officials are quietly confident that not only will the current year’s fiscal consolidation targets be easily achieved, but cutting deficits further under the Act next year poses no headache. Since these deficit targets are expressed as a percentage of GDP, the task has become even easier in a fast expanding economy.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}