 "Cutting Plan spending a compulsion: Chidambaram")
The Budget document he'd presented on February 28 had showed a 17 per cent cut in plan expenditure for the current financial year over last year's estimate. Opposition parties attacked him for taking credit on keeping the fiscal deficit within the aim of 5.3 per cent of gross domestic product, noting it had come at the cost of Plan or development expenditure.
Chidambaram said he'd no choice. Noting he could not cut interest to be paid on debt, pensions, defence outlays and so forth, he said the only place he could economise was plan expenditure. "If we have not done that, fiscal deficit would not have come down, which would have serious consequences."
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He reminded MPs on what had happened in Europe by ignoring, for too long, the consequences of not bringing spending under control.
"Everyone in this house who is observing what is happening to the rest of the world knows what those consequences are. Those are very grave for India and (if not checked) would have spelt clear disaster for India," he said.
The minister said the stimulus given to industry during 2008-09, in the wake of the global economic crisis, had propelled economic growth to 8.6 per cent in 2009-10 from 6.7 per cent in 2008-09 and then further to 9.3 per cent in 2010-11. However, the economy also ran a huge fiscal deficit.
"And, when it (stimulus) impacted the fiscal deficit, inflation went up to 9.6 per cent in 2010-11 and then 8.9 per cent in 2011-12. Now it is 7.5 per cent. This is a consequence, inevitable. You run a high fiscal deficit, it will be inflationary," he said.
Chidambaram noted that rating agencies have already said they'd cut India's sovereign rating if public finances deteriorate. If that happened, it would become even more difficult to attract investment. Therefore, the approach to the Budget had been on how to stabilise the macro economy, while not killing the growth impulses.
The minister was replying to a debate on the Budget proposals. The House later passed various appropriation Bills, to enable government spending.
Chidambaram defended his projection of 19 per cent growth in revenue in the next financial year over 2012-13, when the government expected to witness 16 per cent growth in receipts. He said close to 1.3 per cent more in revenue would come from higher economic growth and one per cent from the 10 per cent super-rich surcharge. The Budget has pegged gross tax revenue to grow 19 per cent, to Rs 12.4 lakh crore, in 2013-14 from Rs 10.4 lakh crore in revised estimate for 2012-13.
He said he was confident that the expenditure pegged in 2013-14 would be adequate to stimulate growth of over six per cent. From 2014-15, he said, the economy would revert to seven per cent growth a year.
Chidambaram noted the 5.2 per cent deficit for 2012-13 was still high and not sustainable. The Budget had estimated a deficit of 4.8 per cent in the next financial year, to be cut to three per cent in 2016-17.
For 2013-14, expenditure is pegged at Rs 16.65 lakh crore, higher by 16 per cent from the revised estimate of Rs 14.31 lakh crore in 2012-13. Chidambaram said this was adequate to stimulate growth. "No ministry and no department has been given less in 2013-14 than what was given in 2012-13," he said.