The process of fiscal correction suffered a setback in 1997-98 largely on account of shortfalls in tax collections and disinvestment receipts, the Economic Survey has pointed out.
Fiscal deficit in 1997-98 increased to 6.1 per cent of GDP against the target of 4.5 per cent.
The ballooning fiscal deficit was primarily due to a shortfall of Rs 14,236 crore in tax revenue and Rs 3,894 crore in disinvestment receipts.
The survey, released here yesterday, has called for reactivating investment and growth, phasing out revenue deficit over the medium-term and keeping the rate of growth of revenue expenditure well below that of the net revenue earned by the government.
The survey has also endorsed the United Front government's tax policies and hinted that dramatic changes in this regard were not in the offing in the forthcoming budget.
"The reduction in the direct tax rates effected in the 1997-98 budget is expected to increase the disposable income of both individuals and corporations, as well as domestic savings. The scaling down of peak import duty rate and import tariffs on a wide range of inputs, intermediates and capital goods is likely to strengthen the competitive environment and yield productivity gains in the future."
The primary deficit exceeded the budgeted figure by 1.7 per cent points of gross domestic product (GDP).
However, if the increase in expenditure attributable to small savings loans was excluded, the fiscal deficit adjusted for increase in the small savings loans to states and union territories would be lower at 5.8 per cent of GDP.
According to the revised estimates, total expenditure exceeded the budget estimates by Rs 3,069 crore.
This is less than the additional expenditure of Rs 4,432 crore incurred by the Centre on account of the loans extended to states and union territories against small savings collections, which have been exceptionally buoyant during the year.
The survey makes a case for states sharing the overall responsibility of fiscal consolidation.
It has pointed out that inefficient state taxes can help limit the benefits accruing from the reform of Central taxes.
It has also pointed out that the discontinuation of ad hoc treasury bills for financing the budgetary deficit is a step towards strengthening fiscal discipline.
