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February 27, 1999
'I have serious worries about debt servicing'
The 1999-2000 Budget presented by Yashwant Sinha today is a completely lacklustre and a directionless exercise. Minor tinkering here and there, repackaging of old schemes is all he has done. There is nothing to boost industry or speed up exports. A great opportunity to move the economy into a high gear has been lost.
The numbers need to be gone over very carefully because the national accounts statistics, calculated by the Central Statistical Organisation, has changed the base for GDP computation from 1980-81 to 1993-94. The new series estimate GDP at 9 per cent higher level. Therefore, unless you use the same base year, the macro economic ratios could be misleading.
Also, there appears to be a jugglery in under-reporting the fiscal deficit by moving the transfer to states of accounts of small saving collections. To the tune of Rs 250 billion. Therefore, the fiscal deficit is actually Rs 1,049.55 billion instead of Rs 799.55 billion as shown. Therefore comparisons have to be made very carefully.
On the central plan outlay, there is a general trend of reporting extremely high allocations to make the Budget look good and then the revised estimates show much less actual expenditure. This year, 1998-99 RE is 16.5 per cent less (Rs 167.05 billion) than the budget estimate for 1998-99.
Downsizing the government by reducing four secretary posts is a gimmick that has been tried in the past. The IAS bureaucracy will never allow it to happen. This is what I meant by tinkering.
The duty reduction in the IT industry is in keeping with the commitment to the WTO under the ITA. There is nothing surprising about it. But it is still welcome.
The fiscal deficit targets will not be achieved unless industrial growth rate starts touching 10 per cent and another very good monsoon leading to a very healthy growth in agriculture, we will not make any dent on the fiscal deficit. In fact, the direction of taxation, particularly the higher custom duties and higher direct taxes, will make industrial revival very difficult. There is nothing which suggests that the industry or exports will pick up.
I would like to add that there are adverse opinions about the gold deposit scheme. The investment in gold more than doubled last year. Making gold an attractive investment option will lead to increased smuggling and hawala transactions.
I don't think the government is continuing with the spirit of liberalisation. In fact, they continue to reverse the direction of the custom duties and direct taxes. Also, macro-economic stabilisation is out of gear.
I have serious worries about debt servicing. Net debt servicing payment last year was Rs 1,931.95 billion, consisting of Rs 1,160 billion in repayment of debts and Rs 772.48 billion in interest payment. Against that, the total revenue receipts were Rs 1,576.65 billion. That means the total revenue receipts were 360 billion less than the total debt service outflow. This is a debt trap. Our total revenue receipts do not even cover the interest payment, which is running to 49 per cent of the revenue receipts. I think it is a matter of serious national concern.
One would like tax holidays to be given to all industries if you could afford it. With the mounting fiscal deficit, that may not be possible. But you will agree that the developmental backlog on NE deserves all the special incentives that you can afford.
Prithviraj Chavan is a senior Congress member of the Lok Sabha.
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