|
|
Run-up to the Budget: Economy
Current Economic Scenario
(percentage
growth) |
1999-2000 |
2000-01 |
Gross
Domestic
Product
(Constant
Prices) |
6.4 |
6.0 |
Agriculture |
0.7 |
0.9 |
Industry |
6.1 |
6.1 |
Services |
9.4 |
8.4 |
Money
Supply |
13.9 |
16.0 |
WPI
–
average
for
year |
3.3 |
7.0-7.5 |
CPI
–
average
for
year |
3.4 |
5.0-5.5 |
Fiscal
Deficit/GDP |
5.6 |
5.5 |
Exports |
13.2 |
18 |
Imports |
11.4 |
7-8 |
Exchange
Rate
in
Rs
(end-March) |
43.60 |
46.80-47.00 |
Review of 2000-2001: Key Budget Initiatives
Fiscal Deficit
Expected Fiscal Deficit Slippage in 2000-2001
The expected slippage in the fiscal deficit is likely to be around Rs 103.74 bn over the Budget 2000-01 figure of Rs 1112.75 bn. Shortfalls in tax revenues and PSU disinvestment proceeds mainly account for this slippage. Fiscal Deficit/GDP ratio is expected to be at around 5.54% against the budget target of 5.1% of GDP, assuming GDP estimates at market prices for the year 2000-01 at Rs 21974.06 bn.
(in
Rs
billion) |
Budgeted
Estimates |
%
of
BE |
CRISIL
Estimates |
|
2000-01 |
till
Dec
2000 |
2000-01 |
Revenue
Receipts |
2036.73 |
65.15 |
1968.94 |
Tax
Revenues
(net) |
1462.09 |
62.65 |
1394.3 |
Non-Tax
Revenues |
574.64 |
71.5 |
574.64 |
Non-Debt
Capital
Receipts |
235.39 |
31.87 |
185.39 |
Total
Receipts |
2272.12 |
61.7 |
2154.33 |
Non-Plan
Expenditure |
2503.87 |
61.53 |
2533.87 |
Plan
Expenditure |
881 |
57.61 |
836.95 |
Total
Expenditure |
3384.87 |
60.51 |
3370.82 |
Gross
Fiscal
Deficit |
1112.75 |
58.07 |
1216.49 |
The major reasons for the slippage in the fiscal are as follows:
- The net tax revenues are expected to be considerably lower by Rs.67.79 bn than the budget target of Rs.1462.09 bn for 2000-01. The net direct tax collections of the Centre are expected to be marginally lower by Rs.8.24 bn primarily due to lower corporation tax collections. Lacklustre performance by the industry can be cited as one of the main reasons for lower corporate tax collections. A negative growth in non-oil imports is expected to result in a sharp slippage by Rs.59.55 bn. in net indirect tax collections of the Centre. Custom duties are expected to fall short to the tune of Rs.34 bn than the budget target of Rs.535.72 bn.
- The target of Rs 100 bn for PSU disinvestment for the financial year 2000-01 is unlikely to be achieved in the last quarter. Till end-Jan, 2001 the disinvestment proceeds amounted to Rs 2.4 bn. A conservative shortfall to the tune of Rs 50 bn is expected for the whole year.
- Non-Plan expenditure is estimated at around Rs 2533.87 bn. vis-à-vis the budget target of Rs.2503.87 bn, a slippage of Rs.30 bn mainly on account of expenditure towards Gujarat earthquake relief measures.
- Plan expenditure is expected to be lower by Rs.44 bn. Till Dec 2000, plan expenditure accounted for only 58% of the budget target.
The slippages are thus likely to lead to a Fiscal Deficit figure of Rs 1216.49 bn vis-à-vis the budget target of Rs.1112.75 bn, or 5.54% of GDP.
Review of Budget 2000-2001:
Budget
2000-2001
announcements |
Achievements |
Fiscal
Issues
- To
curb
built-in
expenditure
growth
and
bring
about
structural
changes
in
the
composition
of
expenditure.
- All
subsidies
to
be
reviewed
- Rs
10,000
Cr
target
from
PSU
disinvestment
for
the
year
200-01out
of
which
Rs
1000Cr
to
be
earmarked
for
retiring
Govt.
debt.
|
Slippage
seen
in
the
fiscal
deficit/GDP
ratio
to
around
5.54%
of
GDP,
leading
to
an
overshooting
of
government’s
borrowing.
PSU
disinvesments
are
at
only
Rs
2
bn
only
till
December
2000.
Further,
non-plan
expenditure
is
likely
to
overshoot
target
due
to
additional
expenditures
for
Gujarat
earthquake
relief
measures.
Although
direct
tax
collections
have
been
healthy,
indirect
tax
collections,
especially
customs
collections
are
expected
to
be
significantly
lower. |
Agriculture
- Institutional
Credit
flow
to
agriculture
targeted
to
a
level
of
Rs.
51,500
crore,
a
20%
increase
over
last
year
flows.
- Setting
up
of
a
National
Commission
on
Land
Use
Policy.
- Corpus
of
RIDF
VI
to
be
increased
to
Rs
4,500Cr
with
interest
on
it
to
be
reduced
by
half
a
percent.
- Micro
Finance
Development
fund
to
be
created
to
boost
Micro
credit
for
agriculture
in
the
country
|
Reforms
process
yet
to
take
off
in
agricultural
sector.
The
sector
still
is
largely
dependent
on
monsoon
and
has
exhibited
volatile
growth
over
the
years.
Growth
in
agriculture
sector
has
been
languishing
below
1%
for
two
consecutive
years
in
1999-2000
and
2000-01
at
0.7%
and
0.9%
respectively. |
Industry
- A
major
liberalisation
of
the
tax
treatment
for
Venture
Capital
funds.
- Boost
to
knowledge-based
- The
policy
of
acquisition
of
companies
abroad
esp.
in
Knowledge
based
sector
by
Indian
corporates
to
be
liberalized.
|
Knowledge
based
sectors,
particularly
software
industry
has
witnessed
robust
growth
at
the
rate
of
35-40%
p.a.
The
manufacturing
sector
has
however
experienced
a
slow
down
with
prevailing
excess
capacities
and
lower
domestic
demand.
Manufacturing
sector
is
expected
to
grow
at
6.4%
in
2000-01(Adv.
Estimates,
CSO)
lower
than
6.8%
growth
achieved
in
1999-2000
(Quick
Estimates,
CSO) |
Infrastructure
- Plan
outlay
for
Central
PSUs
in
the
power
sector
increased
from
Rs
76.26
bn
to
Rs
9,1.94
bn
- Additional
Central
assistance
of
Rs
10
bn
for
state
and
UT
government
for
Power
sector
reforms.
|
Reforms
in
the
power
sector
have
not
progressed
adequately.
The
financial
viability
of
SEBs
continues
to
be
a
serious
problem.
There
is
a
dire
need
for
clear
and
transparent
policies
in
infrastructure
sector
to
attract
private
capital. |
Fiscal issues
Key Objective: Implement steps towards fiscal consolidation
Expectations
from
Budget
2001-2002 |
Benefits |
- Further
rationalisation
of
the
excise
tax
structure
--
The
number
of
special
excise
duties
expected
to
be
reviewed
to
simplify
the
existing
tax
structure
- On
the
customs
side,
peak
import
tariff
rates
expected
to
decline
to
30%
from
the
current
level
of
35%
and
slabs
on
customs
expected
to
be
further
reduced
to
reap
the
benefits
of
globalisation.
|
Simplification
of
tax
structures
leads
to
improved
tax
collections.
Further
rationalisation
in
excise
and
reduction
in
customs
will
enable
the
economy
to
achieve
higher
tax
revenues
and
reap
the
benefits
of
globalisation. |
- Direct
tax
rates
structure
is
expected
to
remain
unchanged.
Surcharge
expected
to
continue
- Emphasis
would
be
on
widening
of
the
tax
base
through
selective
taxation
of
the
services
sector.
|
Widening
the
tax
base
–
an
imperative-
will
help
in
improving
the
net
tax-GDP
ratio
from
its
current
level
of
6.7% |
- PSU
disinvestment
targets
expected
to
be
scaled
up.
|
A
concerted
effort
in
PSU
disinvestment
will
help
reduce
government’s
fiscal
burden
considerably. |
- Fiscal
Deficit/GDP
ratio
for
2001-2002
is
expected
to
be
at
4.8%
of
GDP.
- A
road
map
for
Fiscal
Responsibility
and
budget
management
is
likely
to
be
introduced,
to
create
a
fiscal
focus
for
the
medium
to
long
term.
FRA
would
involve
generation
of
revenue
surpluses
to
reduce
high
cost
debt.
|
- Would
lead
to
fiscal
consolidation
in
the
medium
term
at
the
Centre
|
Agriculture
Key objective: Increase productivity and output through addressing credit needs. Need to reduce volatility of agricultural production and initiate a framework for sustaining industrial growth.
Expectations
from
Budget
2001-2002 |
Benefits |
- Provisioning
for
Accelerated
Irrigation
Benefit
Programme
is
expected
to
be
enhanced
- Public
investment
in
agriculture
likely
to
focus
on
handling
and
storage
of
foodgrains
- Buffer
stock
operations
to
be
reviewed
|
Improved
irrigation
infrastructure
would
help
reduce
the
reliance
of
this
sector
on
monsoons
and
help
reduce
the
volatility
in
agricultural
growth
.
Efficient
buffer
stock
operations
will
minimise
foodgrain
losses.
|
FDI Inflows
Key Objective: To enhance the flow of funds into the economy through the FDI route
Expectations
from
Budget
2000-2001 |
Benefits |
- Fresh
and
higher
caps
for
FDI
are
likely
to
be
announced
with
a
further
boost
to
knowledge
based
industries
|
- Would
help
the
country
attract
a
larger
amount
of
FDI.
The
FDI
flows
touched
Rs.4.5
bn
in
2000.
Budget
initiatives
need
to
be
combined
with
clear
policies
in
various
sectors,
particularly
in
infrastructure.
Higher
private
capital
flows
especially
FDI
flows
will
enable
India
to
move
on
a
higher
growth
trajectory.
|
Fiscal Deficit: 2001-2002
(in
Rs
Billion) |
Budgeted
Estimates |
%
of
BE |
CRISIL
Estimates |
CRISIL
Estimates |
|
2000-01 |
till
Dec
00 |
2000-01 |
2001-02 |
Revenue
Receipts |
2036.73 |
65.15 |
1968.94 |
2288.8708 |
Tax
Revenues
(net) |
1462.09 |
62.65 |
1394.3 |
1645.274 |
Non-Tax
Revenues |
574.64 |
71.5 |
574.64 |
643.5968 |
Non-Debt
Capital
Receipts |
235.39 |
31.87 |
185.39 |
304.35 |
Total
Receipts |
2272.12 |
61.7 |
2154.33 |
2593.2208 |
Non-Plan
Expenditure |
2503.87 |
61.53 |
2533.87 |
2812.596 |
Plan
Expenditure |
881 |
57.61 |
836.95 |
945.7535 |
Total
Expenditure |
3384.87 |
60.51 |
3370.82 |
3758.3492 |
Gross
Fiscal
Deficit |
1112.75 |
58.07 |
1216.49 |
1165.1284 |
Assumptions:
- Tax revenues expected to grow by 18% in 2001-02 over CRISIL estimates for 2000-01
- Non tax revenues expected to grow by 12% in 2001-02
- PSU disinvestments expected to be around Rs.150 bn
- Recoveries of loans to grow by 14%
- Non Plan expenditure to grow by 11%
- Plan expenditure to grow by 13%
Budget 2001-02 is likely to announce a fiscal deficit of Rs.1165.13 bn. This is around 4.8% of GDP for 2001-02 at Rs.24501.07 bn.
Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.
Rediff-CRISIL Budget Impact Analysis
Budget 2001
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