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Fiscal and monetary expectations from Budget

February 26, 2003 13:11 IST

Finance Minister Jaswant Singh is expected to present a mildly expansionary Budget on Friday ahead of state and national elections. The measures announced could lead to widening of an already large fiscal deficit.

Following are some of the measures expected in the Budget for the year starting April 1 based on Reuters reports and views of economists as well as government and industry officials. Also included are key figures from the 2002/03 Budget.


  • Government expected to allocate more funds to rural sector especially for grain distribution and irrigation projects to counter effects of country's worst drought in 15 years.
  • More funds for infrastructure projects.


  • Measures to improve tax compliance, such as making forms taxpayer friendly, and widening direct tax base through better administration and use of computer records to catch evaders.
  • Announcement of roadmap for future tax reforms based on recommendations of panel headed by former International Monetary Funds executive director.

Vijay Kelkar

  • Inclusion of more services, such as those provided by doctors, mechanics and barbers, among others, in tax net.
  • Scrapping of tax on dividends from Indian firms to lure small investors back into the stock market.
  • Abolition of tax on long-term capital gains.
  • Reduction in excise duties on cars, air conditioners, televisions, aerated water, tea and processed food products, among others, to boost consumer demand.


  • Raise foreign direct investment in private-sector banks to 74 per cent from 49 per cent.
  • Allow tax breaks on bad loan provisions.


  • Market borrowings to rise only marginally despite expansionary Budget due to expectations of higher tax revenues from pick-up in industrial activity and spending cuts.
  • Analysts and dealers surveyed by Reuters forecast government will target gross market borrowings of Rs 1.45-1.50 trillion ($30.4-31.4 billion) for financial year ending March 2004, just above 2002/03 target of Rs 1.43 trillion.


  • Government likely to overshoot 5.3 per cent fiscal deficit target for 2002/03.
  • Government expected to peg 2003/04 deficit target slightly higher than the 5.3 percent level in 2002/03.


  • Privatisation receipts from 2002/03 will be about Rs 40 billion, way below targeted Rs 120 billion.
  • Privatisation goal for 2003/04 expected to be set at Rs 120 billion.

Interest rates

Interest rates on some small savings schemes likely to be cut by at least 50 basis points to bring them in line with overall easier monetary environment in a move likely to affect middle class.


Defence spending likely to rise marginally from this year's estimate of Rs 650 billion. Savings also expected from this year's allocations because some arms purchases were deferred.


  • Government likely to increase foreign direct investment cap in fast-growing telecoms sector to 74 per cent from 49 per cent.
  • Customs duties on telecom equipment such as base stations and switches expected to be scrapped.


Customs duties cut for crude and oil products expected to mitigate impact on domestic refiners who have not been allowed to raise output prices in line with surging global crude oil prices.


Customs duties on crude palm oil likely to be cut by 10 percentage points to 55 per cent. Traders estimate palm oil imports could rise by 500,000 tonnes to about 3.4 million tonnes a year on back of move.

Following are key figures from 2002/03 Budget:

  • Budgeted revenue: Rs 2,451.05 billion
  • Budgeted capital receipts: Rs 1,652.04 billion
  • Budgeted spending: Rs 4,103.09 billion
  • Defence spending: Rs 650 billion
  • Budgeted fiscal deficit: Rs 1,355.24 billion (5.3 per cent of gross domestic product)
  • Revenue deficit: Rs 953.77 billion (3.8 percent of GDP)
  • Inflation (WPI): 5.04 per cent (week ended February 8)
  • Forex reserves : $75.3 billion (week ended February 8)
  • Exports : $38.11 billion (between April and December 2002)
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