Heavy Agenda

The quite exceptional reception that the budget has got must be attributed as much, if not more, to the finance minister’s declarations of economic policy intentions not quite germane to the budgetary exercise as to what he has to offer by way of fiscal measures. Of course, the halving of the tax on dividends, the withdrawal of surcharges on corporate and non-corporate taxpayers, except the 2 per cent surcharge imposed in the wake of the Gujarat earthquake, and the unexpectedly steep cut of 1.5 percentage points in interest rates on provident funds and small savings schemes (which together with the two one-half percentage point cuts in the Bank rate by the Reserve Bank is expected to lower interest rates all round) have all been predictably greeted with applause. For all that, not a few of the finance minister’s claims for the budget, viewed as a fiscal exercise strictly, fail to quite stand up to scrutiny.

It is true, as the finance minister has said, that in 2000-2001 “for the first time in many years, the fiscal deficit target fixed in the budget has indeed been achieved”. The revised estimates for the year show the revenue deficit too at the budgeted level of 3.6 per cent of GDP. It is not evident, however, that this achievement has been the result of any notable acts of fiscal correction. Comparison of the budget and revised estimates for the year show excess revenue expenditure of nearly Rs 2,500 crore and shortfall of capital expenditure of about Rs 5,400 crore. Not even a dent could be made in the outgo on account of subsidies; the revised estimate of subsidies shows in fact an excess of Rs 5,600 crore over the budget estimate. There is in addition the deficit in the oil pool account which is expected to mount to Rs 10,000-12,000 crore by the end of the current financial year and which interestingly finds no mention in the finance minister’s speech.