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Rediff.com  » Business » Govt to rationalise subsidies: Jaitley

Govt to rationalise subsidies: Jaitley

August 01, 2014 14:39 IST

The government will rationalise subsidies to ensure that only those entitled are benefited and the subsidy bill will be one of the major tasks before the Expenditure Management Commission it intends to set up in the coming days.

Finance Minister Arun Jaitley informed Lok Sabha on Friday that government "shall" rationalise subsidies to ensure that only the vulnerable sections get its benefits and not those who are ineligible.

He said government plans to set up an Expenditure Management Commission in the coming days and one of its major tasks will be the subsidy bill of the government.

He said the proposed commission will give its report by the end of the financial year.

The minister said that keeping in view the importance of keeping fiscal deficits under control, the government proposes to bring down major subsidies from 2.2 per cent of GDP in 2013-14 (revised estimates) to 2.03 per cent of the GDP in 2014-15 (budget estimates).

"With active policy measures/reforms of the government to contain fiscal deficit and quantum of subsidy bill it is expected that the subsidy will progressively reduce.

It is proposed to keep the subsidy level at 1.7 per cent and 1.6 per cent of GDP in 2015-16 and 2016-17 respectively," he said in his written reply.

To a supplementary on the need to recover pending taxes and removing tax collections instead of slashing subsidies to improve fiscal deficit, Jaitley said fiscal deficit is a situation which is reached when government's expenditures go out of control and there is no rise in revenue.

He said taxation has to be rationalised to make Indian products competitive.

He said better saleability of products would mean increase in growth which would lead to larger revenue.

The Finance Minister said the present government is clear that increased taxes lead to sluggish economy.

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