With reference to A K Bhattacharya's column, "Fiscal gains no reason to celebrate yet" (November 2), the Union government's revenue surplus budget during August and September has come as a pleasant surprise. Most importantly, the usually huge financial outgo (over 15 per cent) towards payment of a host of subsidies has shown a decline -a welcome sign.
However, this may be attributed to a persistent decline in international crude oil prices from $116 a barrel in February 2013 to $109 in February 2014 and $59 in February 2015, the current rate being $48.5 a barrel. This has facilitated a lesser and lesser amount to be earmarked for subsidies that domestic gas consumers are entitled to. This apart, the roll-out of the Direct Benefit Transfer scheme helped curb some universal leakages and prevented the diversion of subsidies to ineligible segments of society.
Another point to be noted is that the government has been 'harvesting' a rich crop for the country's oil-producing companies by not passing on the full benefits of the regularly falling international crude oil prices to domestic consumers. The government's revenue receipts were accentuated by a constant rise in indirect taxes, key among them being the service tax whose ambit is being extended.
Interestingly, fiscal gains increased as the government's revenue deficit dropped from 91 per cent (April-September 2014) to 68 per cent (April-September 2015). Coupled with a surplus of revenue receipts, this might have enabled the government to be properly placed to achieve fiscal consolidation. A caveat: although this year's fiscal deficit target of 3.9 per cent of gross domestic product could be attained, there is no similar positive expectation on this count in the near future.
The position with respect to this year's targeted revenue of Rs 69,500 crore from disinvestments appears non-achievable, considering that only Rs 12,700 crore has been collected so far and Rs 8,077 crore was generated through LIC's acquisition of Indian Oil Corporation's shares.
With regard to the government's planned capital expenditure to facilitate much-needed investments in several key segments, more funds are required. At the same time, the government must take a holistic view of public sector banks' lending limitations. Instead of regular spoon-feeding by the government these banks ought to be made to fend for themselves.
Achieving fiscal consolidation is a long-drawn-out process and requires a well worked-out action plan, enough courage and the display of acumen in fiscal discipline by the government.
S Kumar, New Delhi
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