No revenue deficit by 2005-06: FM

Higher economic growth and prudent expenditure management will wipe out revenue deficit by 2005-06, two years ahead of the time that Fiscal Responsibility and Management Act envisages, according to Finance Minister Jaswant Singh.

"Revenue deficit will be brought down to 2.9 per cent in the next fiscal, and wiped out by 2005-06," Singh said, adding fiscal deficit was slated to come down over one per cent this fiscal.

This drastic reduction in deficit is expected despite the give-aways of over Rs 16,000 crore by way of cuts in excise and Customs, and the merger of 50 per cent Dearness Allowance with basic salary of government employees.

Fiscal deficit is pegged at 4.8 per cent of the GDP in 2003-04 against 5.9 per cent in 2002-03 and 5.6 per cent budgeted for 2003-04. "This was possible due to better expenditure management, lower growth in subsidy bill, higher growth in revenue at 17 per cent and higher GDP growth," Singh said.

Singh expects GDP growth to sustain at over 8.0 per cent in the coming year as well, which will push up revenue and help the Centre reduce its deficits.

Expenditure control alone resulted in savings of Rs 11,145 crore this fiscal, he said. The government plans to scale down its spendings over 3.5 per cent to Rs 4,57,434 crore in 2004-05, compared to the revised estimate of Rs 4,74,255 crore in 2003-04.

Significantly, Singh said, non-Plan expenditure was up only 2 per cent while Plan expenditure rose 11 per cent."

"The significant aspect was that the rise in subsidies on food, fertiliser and petroleum was only one per cent this fiscal against 20 per cent growth in 2002-03," he added. The government's interest outgo went up only 5 per cent this fiscal, compared with 6.5 per cent last fiscal, he said.

Moreover, revenues have surged 17 per cent this fiscal and the disinvestment target of Rs 13,200 crore is also expected to be exceeded.

The receipts from disinvestment will be Rs 14,500 crore as the government is confident of divesting 10 per cent each of its stakes in Oil and Natural Gas Corporation and Gail India by March 31.

Of the total spending budgeted for 2004-05, non-Plan expenditure has been budgeted lower at Rs 3,22,363 crore for 2004-05 compared with Rs 3,52,748 crore in 2003-04. This is despite the higher spendings on interest payments, subsidies and defence.

Among the non-Plan revenue expenditures, the Centre's interest outgo will amount to 24 per cent of the total expenditure at Rs 1,29,500 crore during the next fiscal compared with Rs 1,20,475 crore in 2003-04.

Subsidies bill is expected to go up to Rs 45,175 crore in 2004-05, from Rs 44,707 crore in 2003-04, while defence spendings is budgeted to surge to Rs 43,517 crore from Rs 43,394 crore.

Among the non-Plan capital spendings, the Centre proposes to hike defence spendings to Rs 22,483 crore in 2004-05 from Rs 16,906 crore in 2003-04.

Plan expenditure is slated to go up to Rs 1,35,071 crore next fiscal from Rs 1,21,507 crore in 2003-04. The total Budget support for central Plan will be stepped up to Rs 81,367 crore for 2004-05 from Rs 72,847 crore in 2003-04.

The central assistance to states and UTs will go up to Rs 53,704 crore from Rs 48,660 crore. On the revenue side, Singh said the government was able to attain 17 per cent growth in tax collection.

The finance minister said the buoyancy in tax collections was despite the fact that tax rates were not changed.

He said the limit on standard deduction and income tax rates needed to be "revisited". "The changes could not be carried out in the interim Budget as it would require an amendment in the Income-Tax Act," he added.

The government has also promised to extend the long-term capital gains tax in listed equities and 12.5 per cent dividend distribution tax on open-ended equity mutual funds schemes beyond February 28 this year.

While optimistic on tax collections, the finance minister estimates government's receipts will decline 4.0 per cent to Rs 4,57,434 crore next fiscal than the revised estimate of Rs 4,74,255 crore for 2003-04.

The decline will be mainly due to a fall in non-tax revenues like dividends, profits and capital receipts.

Expecting a robust growth in service tax, excise, corporation tax and income tax, the government has estimated gross tax revenue to rise about 18 per cent to Rs 3,00,323 crore.

The gross tax revenue is at Rs 2,54,923 crore as per the revised estimate for 2003-04. Service tax collection is estimated at Rs 13,500 crore in 2004-05, from Rs 8,300 crore for the current fiscal.