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FM promises to cut fiscal deficit, more aid to states

Finance Minister Yashwant Sinha today promised greater financial assistance to the states and to bring down the fiscal deficit.

Presenting the interim Budget for 1998-99 in the Lok Sabha, Sinha announced an enhanced share for the states from the Voluntary Disclosure of Income Scheme of the previous government proposing an additional Rs 32.15 billion for the states.

The states will now receive total devolution on the VDIS account to Rs 75.94 billion in the current financial year. The previous government had only promised devolution up to the end of December, amounting to Rs 43.79 billion.

Sinha also announced a bonanza for the states in the shape of an additional sum of Rs 10 billion by way of additional central assistance for states for externally aided projects to settle all pending claims for the current financial year.

The finance minister declared that the government would bring forward a constitutional amendment bill to give effect to a recommendation of the Tenth Finance Commission. The commission has suggested an alternative scheme for sharing of resources between the Centre and states.

Under the scheme, 29 per cent of the gross proceeds of almost all central taxes will be assigned to the states.

Underlining the need to bring down the fiscal deficit to reasonable levels, the finance minister said the government proposed to review the content of budgetary support for the annual plan 1998-99 in the regular budget.

The fiscal deficit has been pegged at 6.1 per cent for the current financial year, and this will now be reduced, he stated.

The finance minister vowed to go ahead with disinvestments of the public sector undertakings, but in a transparent manner.

He promised that the regular Budget, which will be presented in a few weeks's time, will boost agriculture and industry and restore dynamism to exports. He also promised to initiate immediate action to contain the growth in establishment expenditure and encourage greater form of foreign investment.

The total expenditure in 1998-99 is estimated at Rs 2,649.88 billion against Rs 2,352.45 billion in the current year.

Out of this amount the gross budgetary support to the central, state and Union territories plan is placed at Rs 644.61 billion against Rs 606.3 billion in the current year.

Non-plan expenditure in 1998-99 is estimated to be Rs 2,005.27 billion against Rs 1,746.15 billion in the current year, an increase of Rs 2.5912 billion.

Sinha explained the reason for the increase over the revised estimates for 1997-98 as being on account of the Rs 103 billion interest payments, Rs 47.47 billion in pensions, Rs 30 billion in defence and Rs 15 billion in major subsidies.

He also left to the regular Budget the issue of strengthening the financial system, improving infrastructure and ushering in strict fiscal discipline.

The interim Budget shows a large shortfall in disinvestment receipts to the order of Rs 38.94 billion from the Budget estimates of Rs 48 billion.

According to Sinha, another noteworthy point of the revised estimates for 1997-98 was a major shortfall in tax collection with net tax revenues of the Centre dropping by 12.6 per cent over the Budget estimates.

Net tax revenues for the Centre are estimated at only Rs 991.58 billion, reflecting a drop of Rs 142.36 billion mainly due to lower customs revenue on account of both lower volume as well as unit price of imports.

Besides there was decline in excise resulting from unusually low industrial growth, the finance minister said.

Referring to the East Asian crisis, the finance minister said that it was the inherent strength of the Indian economy, built over decades, which enabled the country not to succumb to the economic gales that have been sweeping through the Asian region.

He cautioned that the external economic environment was fraught with unusual uncertainty and the country must remain ever vigilant and watchful.

To achieve rapid economic growth with low inflation and external stability despite the difficult international economic scenario, he felt the country must conduct its economic policies with foresight and flexibility.

The interim Budget however seeks to continue the existing tax structure.

Sinha sent out strong pro-liberalisation signals by declaring that economic reforms would be deepened, broadened and accelerated.

"Our goal is to make India an economically strong and vibrant nation which will participate in the world economy with confidence and from a position of strength. We are determined to build an India in which there is no place for hunger, poverty, unemployment, and deprivation," Sinha said.

Expressing concern over the economic situation the finance minister said the overall economic growth has slowed to 5 per cent in 1997-98, agriculture registered a negative growth of 2 per cent, industrial growth averaged 4.6 per cent over the 12 month period up to January 1998, and exports recorded a negative growth in dollar terms.

The government would review the Ninth Plan and revise the Budget estimates. Immediately, he said, there was a need to contain the growth of establishment expenditure and initiate PSU disinvestment.

As for the goals set in the national agenda for governance the finance minister said every effort would be made to implement these in the regular Budget.

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