In the budget 2013-14, the finance minister P. Chidambaram had to his task to tread a path laid with thorns- accommodate fiscal consolidation and revive growth. And it seems that the finance minister was able to craft the budget that would take a crack at both the goals simultaneously. Though this budget was supposed to cater to popular public sentiments in light of the elections next year, PC resisted from announcing an overtly populist budget that could (or would ) have turned the public finances upside down.
Fiscal consolidation implies reduction of expenditures and increasing revenues in order to reduce fiscal deficit (excess of public expenditures over public revenues). With fiscal deficit seen at 4.8% of GDP in the year 2013-14, it was the need of the hour to rationalize expenditures and to generate higher revenues. Equally necessary was to see that economic growth was not hurt by the plans to restrain fiscal binge.
Though the budget bettered the fiscal deficit target for the year 2013-14, it is still far from the ideal level of 3% of GDP. Gross borrowings have been expected at INR 6.29 trillion. A midst such worrying signs, finance minister delivered a budget that stood up to expectations. Subsidies that have accounted for a major burden on public finances have been kept under a check this time with subsidies bill at INR 2.3 trillion, down by nearly 300 million rupees owing to substantial cuts in petroleum subsidy. Food subsidies though saw a rise with Rs.100 billion being separately granted for Food Security Bill in addition to Rs.900 billion for the overall outlay on food subsidies. Defence budget rose by 4.8% negating all rumours of a cut in defence spending.
While restricted profligacy would only address the expenditure side, revenue side is also to be taken care of. Increase in revenue was simultaneously taken aim at in this budget. Tax revenue growth has been fairly optimistically pegged at 19% for the next fiscal year. Rs.133 billion are expected to be raised through direct tax proposals and Rs. 47 billion through indirect tax proposals. Revenue of 558.14 billion Rupees will also be raised through the stake sale in some public sector companies.
Economic growth revival is being a major concern for the government with the growth levels dipping continuously. Investment has been acknowledged as the key instrument in putting the economy back on high growth trajectory. Various steps have been taken to spur investment such as increased outlay on infrastructure, setting up of Cabinet Committee on Investment and an allowance of 15% to attract high value investments. There has also been generous disbursement for social sectors with focus on education and health.
Credibility remains the inherent issue of contention as the government has subsequently missed its targets. Nevertheless, government will have a tough task ahead, with the goal of propelling economic growth and plodding the fiscal consolidation discourse. Budget has pitched the right note!