A parliamentary committee has pulled up the finance ministry for not adhering to Fiscal Responsibility and Budget Management Act in cutting revenue deficit by 0.5 per cent of GDP for 2005-06 saying there should not be deviations every now and then.
Parliament on Tuesday approved the long-awaited fiscal responsibility legislation after Finance Minister Jaswant Singh promised there would be no lowering of developmental expenditure.
Vijay Kelkar, who headed the committee on tax reforms, on Tuesday warned that higher economic growth and foreign direct investment flow could not be achieved without hard fiscal reforms.
The Union Budget for 2004-05, which is being viewed as a "litmus test" for the Congress-led government, may unveil the roadmap for wiping out revenue deficit well in advance by 2007 and a subsequent reduction in fiscal deficit to manageable limits.
Finance Minister P Chidambaram said revenue deficits would have to be wiped out first in the economy.
Vijay Kelkar, advisor to the finance minister, has been entrusted with the new task of preparing quarterly review of the economy as mandated under the Fiscal Responsibility and Budget Management Act.
Ahead of the Budget, global rating agency Standard and Poor's has warned India may not be able to achieve the fiscal responsibility and budget management target of axing fiscal deficit and projected a lower growth of 6 per cent this fiscal.
The Centre will take a hit of Rs 26,000 crore (Rs 260 billion) in 2005-06 by implementing the twelfth finance commission's proposal of a higher share of central taxes, grant and debt relief to states.
Booming manufacturing and services sector is likely to push up India's GDP growth to 7.7 per cent in 2006-07, but inflationary pressure may lead to hike in interest rates
The Parliament on Wednesday approved a watered down version of the fiscal responsibility bill aimed at disciplining state finances that left out clauses binding the government to tough fiscal deficit targets.
To keep investors' confidence, however, Modi's government will need to be seen containing the fiscal deficit, while also increasing spending in key areas of the slowing economy.
Chief Economic Advisor Krishnamurthy Subramanian said China imports a lot of components, parts, assembles and integrates and then exports them.
Unveiling far reaching fiscal reforms to improve tax mop up and wipe out revenue deficit by 2009, the Kelkar panel on Friday proposed a single countrywide goods and services tax, removal of tax exemptions and raising income tax slab to Rs 100,000.
The economic fundamentals were strong enough to ensure 6-6.5 per cent growth in GDP during 2003-04, while fiscal deficit will be under control, D C Gupta, finance secretary said on Friday.
'Modi had not discussed demonetization with me prior to his announcement on 8 November 2016. 'I learnt of it along with the rest of the country. 'I was not surprised when he did not discuss the issue with me prior to making the public announcement. 'It fitted in with his style of making dramatic announcements.' A fascinating excerpt from Pranab Mukherjee's The Presidential Years: 2012-2017.
The Indian economy appears to have slowed down in 2018-19 due to lower private consumption, tepid growth in fixed investment and muted exports, a finance ministry report has said.
It would also be the last policy of Rajan
The Budget has to provide for capex on roads, railways, defence and other infrastructure sectors.
West Bengal, the chief minister said, cannot be compared with other states and despite all hurdles it had an increased revenue generation over the last three years from Rs 21,000 crore (Rs 210 billion) to Rs 40,000 crore (Rs 400 billion).
Making a case for an optimal fiscal stance, the Economic Survey on Friday said growth leads to debt sustainability and not necessarily vice-versa. "This is because debt sustainability depends on the 'Interest Rate Growth Rate Differential' (IRGD) i.e. the difference between the interest rate and the growth rate in an economy. "With the Indian context of potential high growth, the interest rate on debt paid by the Indian government has been less than India's growth rate by norm, not by exception," it said.
It would be interesting to see what the government proposes to investors.
Fitch Ratings on Thursday said the resurgence of COVID-19 infections may delay India's economic recovery, but won't derail it, as it kept the sovereign rating unchanged at 'BBB-' with a negative outlook. It projected a 12.8 per cent recovery in GDP in the fiscal year ending March 2022 (FY22), moderating to 5.8 per cent in FY23, from an estimated contraction of 7.5 per cent in 2020-21. Fitch had in June last year revised outlook for India to 'negative' from 'stable' on grounds that the coronavirus pandemic had significantly weakened the country's growth outlook and exposed the challenges associated with a high public debt burden.
'We will not compromise on it. We will not make any deferred payments or cuts.'
To enable widen the fiscal deficit beyond the permissible limit under the present legislation, the government may have to propose amendment to the FRBM Act in the Finance Bill.
Finance Minister Arun Jaitley presented the Budget in Parliament on Saturday.
He did not believe in any fiscal puritanism. In 2012, when it was almost certain that the government will breach the 2012-13 fiscal deficit target, he wrote that in abnormal times, abnormal measures are required to get back to normalcy.
The government on May 17 formed a five-member committee.
Finance Minister Nirmala Sitharaman has brought down the budgetary allocation for the fertiliser subsidy for FY21 to Rs 71,309 crore, from the RE of Rs 79,998 crore for FY20, while increasing food subsidy to FCI through "ways and means advance" to Rs 50,000 crore for FY21, from Rs 36,000 crore in RE for FY20, and under the National Food Security Act (NFSA) to Rs 77,982 crore, from Rs 75,000 crore.
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