Sinha to target Rs 280-billion tax receipts hike

P Vaidyanathan Iyer

Finance Minister Yashwant Sinha is likely to set the fiscal deficit target for 2002-03 at 4.54 per cent of the gross domestic product even as he expects a Rs 280-billion increase in gross tax receipts.

It is not yet clear how much of the increase in gross tax receipts would be accounted for by new tax measures. Gross tax receipts go up because of a combination of new levies, buoyancy in collections and the inflation rate.

The fiscal deficit for the current fiscal year was targeted at 4.7 per cent of GDP, but because of revenue slippages the revised fiscal deficit could widen to 5.1 per cent, according to the latest estimates. Against the budgeted gross tax revenue of Rs 2,266.49 billion in 2001-02, the revised estimate is expected to be about Rs 2,000 billion.

Banking on a 14 per cent increase in tax revenue next year, Sinha is planning a 12 per cent step-up in government expenditure. Total expenditure in 2002-03 is, therefore, expected to increase to a little less than Rs 4,000 billion, compared to the revised estimate of Rs 3,570 billion for the current year. While the budget estimate for the current fiscal's total expenditure is Rs 3,752.23 billion, the Centre is expected to save almost Rs 180 billion.

In the backdrop of a persistent slowdown, Sinha may also revise the key assumptions relating to GDP and the inflation rate. He had projected a real GDP growth rate of 6.5 per cent for the current year and had pegged the inflation rate at 6 per cent. However, the adverse developments during the year could force a downward revision of the GDP growth rate to 5.5 per cent and the inflation rate to 4.5 per cent for the current fiscal.

According to the projections, the tax revenue of Rs 2,280 billion for the next fiscal is just a shade higher than the budget estimate of Rs 2,266.49 billion for 2001-02.

Given the estimated shortfall of over Rs 250 billion in tax realisation this year, the gross tax receipts for the coming year could be higher by just about Rs 10 billion when compared to the budget estimates of this year.

Sinha is also likely to rely on a sharp rise of over 11 per cent in non-tax revenue next year. Against a revised estimate of Rs 680 billion from non-tax revenue (primarily interest receipts, user charges and dividends from the RBI, banks and other public sector units), the next fiscal is expected to mobilise Rs 755 billion under this head.

As per these estimates, the Centre's interest liabilities for the next fiscal are likely to climb by over Rs 60 billion compared to the budget estimates of Rs 1,123 billion.

The declining yields on government securities and a softer interest rate regime have enabled the Centre make savings of over Rs 40 billion in the current fiscal itself. This would mean that when compared to the revised estimates, the Centre's interest outgo would be higher by about Rs 100 billion.

With expected savings of about Rs 40 billion in defence this year (BE: Rs 620 billion), the finance ministry's allocation for the sector could go by a significant 13 per cent to about Rs 675 billion. With expected savings of Rs 140 billion in non-Plan expenditure this year, the increase could be over 5 per cent compared to the revised estimates.

At 4.54 per cent of the GDP, the gross budgetary support for the 2002-03 annual plan stands at Rs 1,130 billion. According to the estimates, the back-loading of the GBS (where it is increased gradually every year over the Plan period) would ensure that it rose from about 4.24 per cent of the GDP in 2002-03 to 4.73 per cent of GDP in the final year of the plan, 2006-07.

YOU MAY ALSO WANT TO READ:
The Rediff Budget Special
Run-Up To The Budget
Money