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The First Batch of Supplementary Demands for Grants for 2010-11
were presented in Parliament last week to seek authorisation of a
massive Rs 68,294 crore disbursement, which would cause cash
outgo aggregating Rs 54,589 crore and another Rs 13,705 crore
matched by savings of the ministries and departments or by enhanced
receipts and recoveries. The supplementary demands totalling 61, equivalent
to 6 per cent of the total budgeted disbursement or around 1 per
cent of GDP, were among the largest splurges in recent years, which was
obviously possible because of the Rs 1 trillion bounty reaped under telecom
licence auctions during June. Thus, notwithstanding the huge cash
outgo, the finance minister could proclaim that it would still be possible to
contain fiscal deficit at budgeted level during the year.
The major unbudgeted expenses now planned include Rs 14,000 crore
for subsidy to PSU oil marketing companies for under-recoveries in marketing
of petroleum products, Rs 6,379 crore for special assistance to
states, Rs 4,000 crore grants for creation of capital assets under Right to
Education, and Rs 6,300 crore for meeting additional requirements of
PMGSY. The outlays that would not involve cash outgo included Rs 8,467
crore for quota increase at IMF.
In the meantime, bolstered by huge non-tax revenue receipt of over Rs
1 trillion in June (due to auction of 3G spectrum and BWA licences) and
continued buoyancy in tax receipt, gross fiscal deficit at Rs 402 billion for
Q1 was one-third of that a year ago. The deficit worked out to just around
11 per cent of the total budgeted for the year-the lowest ratio for the period
in recent years which usually sees disbursement outstripping receipt
by wider margins. Thus, the ratios worked out to 31 per cent in 2009-10
and as much as 65 per cent in 2008-09. Cumulative revenue deficit
dropped to Rs 106 billion, one-tenth that a year ago, with huge net surplus
recorded in June in this segment.
Tax receipt has been running markedly higher in the current fiscal with
collection over the quarter working out to 33 per cent more: corporate tax
was up 24 per cent and personal income tax 14 per cent; while signalling
speedier recovery in various sectors, customs duty shot up 62 per cent
and excise duty 52 per cent. However, service tax receipt was up by 9 per
cent only. Disbursements over the quarter escalated 23 per cent against
17 per cent year ago. Plan account expenses rose 61 per cent and nonplan
spending by a relatively modest 8 per cent. Plan capex increased 48
per cent and revenue disbursements that include grants for capital asset
creation also 63 per cent.
Central government finances are in a much better shape in the current
fiscal. Economic growth assessed higher than that factored in
budget calculations should yield superior revenue receipt and with
several PSU equity disinvestments lined up, the total non-debt receipt
should be buoyant enough to take on any unforeseen disbursement
extravagance. In this context, we would suggest that constrained less
by deficit considerations, the Central government should give a solid
spending push to infrastructure investment in the fourth year of the
11th Plan to realise the plan targets.
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