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FY 2000-01: A Budgetary Review

While the industry is busy lobbying for all possible sops in the coming Budget, economists have reasons to worry about the overall economic scenario of the country. Rising fiscal deficit, burgeoning government debt, slowdown in industrial growth and sagging capital market are some of the key issues that would weigh heavily on the finance minister when he delivers his fourth consecutive budget on February 28.

Revenue slippages: Disinvestment target again goes awry

The situation on the revenue front has not seen any signs of improvement this fiscal year. The Rs 100 bn divestment target has remained an unfulfilled dream so far and the government at best may be able to garner only Rs 30-Rs 40 bn in this fiscal year.

Indirect tax collections remained disappointing

The main disappointment is on the indirect tax front. Both customs and excise duty collections have fallen below target. Customs duty collections have grown by only 1.4% during Apr-Jan 01 against the targeted growth of 12% for the entire fiscal year. Excise duty collections were slightly better at 12% during this period, though the growth rate is still short of the budgeted 16.8%. Total revenue collections from indirect taxes have grown by just 7.6% in the first ten months of this fiscal year compared to the budgeted growth of 14.7%. If the situation fails to improve in the remaining two months, the shortfall in indirect tax collections could be Rs 70-Rs 80 bn.

Direct tax collections have faired well

Buoyant trend witnessed in direct tax collections has saved the day for the Finance Minister. Growth in direct tax collections for Apr-Jan 01 has remained above the targeted growth of 26.5%. However, growth rates in direct tax collections have fallen from a high of 60% in Apr-Aug 00 to 27% in Apr-Jan 01. The Government at best is likely to meet its target for direct tax collections. The possibility of surpassing the budgeted amount on the strength of high growth rates seen in earlier months now looks remote.

Expenditures: Slippages expected on subsidy front

Though the government deserves some appreciation for keeping its expenditure under check, the possibility of slippages in subsidies cannot be ruled out. Hike in domestic fuel prices to curb the widening oil pool deficit might have actually increased the subsidies on petroleum and petro-products. The Government is also likely to allocate an additional Rs 20 bn-Rs 30 bn in the current fiscal year for Gujarat earthquake relief, though a part of it (Rs 13 bn) will be raised through imposition of 2% additional surcharge on individual and corporate taxes.

Fiscal Deficit likely to cross 5.5% of GDP

Shortfalls in indirect tax collections and disinvestment receipts are expected to be in the range of Rs 80 bn-Rs 100 bn. Slippages in subsidies and extra budgetary allocation are likely to be at Rs 30 bn-50 bn. As a result, fiscal deficit is likely to cross 5.5% against the budgeted target of 5.1%. D&B believes that there would be no major turnaround in the next two months to rein in the fiscal deficit to levels near 5.1%.

Rediff-Dun & Bradstreet Budget Impact Analysis

Budget 2001

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