Pant against cut in Plan size for 2004-05

The uncertainty over the presentation of a full Budget notwithstanding the Planning Commission has asked Prime Minister Atal Bihari Vajpayee to ensure that the Plan size for the next fiscal be maintained at Rs 1,59,000 crore, as approved by the National Development Council in the Tenth Five Year Plan.

In a letter to the Prime Minister, Planning Commission Deputy Chairman KC Pant cited the recent state elections and said, "Public expectations from the Central and state governments are likely to become even more exacting."

He added that the people would demand more jobs, an early delivery of promised infrastructure development initiatives like the Golden Quadrilateral and Sagarmala projects and social services programmes like the Sarva Shiksha Abhiyan.

The finance ministry had wanted the Plan body to restrict the Plan size for the next fiscal to below Rs 100,000 crore. It had argued that a rise in the gross budgetary support added to the government's debt burden and pushed up the fiscal deficit.

Pant has, however, pointed out that the Plan expenditure is largely for productive assets which contribute to growth. "A high rate of growth could be the best guarantee of incremental revenue receipts and a declining revenue deficit," he said in the letter.

Though the Fiscal Responsibility and Budget Management (FRBM) Act requires the government to achieve zero revenue deficit by 2007, there is no binding target for 2004-05. So long as Plan expenditures were restricted to those which were productive and non-recurring in nature, the spirit of the FRBM Act would be adhered to, Pant argued.

Given the expectation of 7.2-8 per cent gross domestic product (GDP) growth and 5.5 per cent inflation growth in 2003-04, a 13 per cent increase in the gross budgetary support will keep the ratio of budgetary support to GDP unchanged.

As the gross budgetary support for the current fiscal is Rs 1,31,000 crore, a 13 per cent increase will mean Rs 1,48,000 crore. Therefore, the demand for Rs 1,59,000 crore will only see a marginal increase in the budgetary support to GDP ratio and its impact on the fiscal deficit will be minimal, according to Pant.

This year, against the projected budgetary support of Rs 1,34,000 crore, the finance ministry had budgeted for Rs 1,21,000. A sum of Rs 10,000 crore was then given as an additional allocation.

Stating that such ad hoc allocations made separately by the finance ministry subvert the Plan process, Pant said the outlays and budgetary support provisions approved by the National Development Council should be treated as "sacrosanct".

The Budget for the next fiscal will be the most significant statement of the government's commitment to adhere to its own roadmap for development "" the Tenth Five Year Plan.

Any shortfall in the Plan size would mean curtailment of Plan resources for job creation, investments in infrastructure and sub-optimal budgetary support in areas like education, health and nutrition. Also, the government's ability to implement several programmes announced by Vajpayee would get considerably impaired, the letter said.

A Lower budgetary support will also mean that the country will have to tone down its ambitions with regard to space and atomic energy programmes, in which China has made great strides.