Finance Minister K. M. Mani told the Assembly on Monday that he was addressing the hard task of containing the revenue deficit of the State.

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Presenting the Budget for 2012-13, the Minister said that the revenue receipts had gone up by 19 per cent in the current year compared to the previous year. But, the revenue deficit could not be contained at the level of 1.4 per cent of the gross domestic product specified by the Finance Commission. However, it would be possible to limit the revenue deficit within the 1.81 per envisaged in the revised Budget for 2011-12.

Mr. Mani said that the Union Budget presented to the Parliament this month showed that there would be a reduction in the State share in taxes by Rs. 187 crore this year and by Rs. 21 crore next year. The estimates stated in his Budget would vary to that extent. As a result, the revenue deficit envisaged this year would go up from the estimated 1.67 per cent to 1.73 per cent. The fiscal deficit would rise from 3.46 per cent to 3.5 per cent.

The Minister contended that a substantial percentage of the revenue expenditure was grants given to the local self government for their annual plans. Much of this was being used for creation of assets. If it is considered as capital expenditure (as is under consideration of the Central government), the effective revenue deficit would be within the 0.89 per cent envisaged in the Fiscal Responsibility Act and lower than that specified by the Finance Commission.

Mr. Mani noted that the non-plan expenditure in the revenue account this year had increased by 30 per cent over last year. Most of this was expenditure on salaries, pension and interest. These might exceed the budgeted provision of Rs. 23300 crore this year and reach Rs. 23500 crore. This disproved the claim of his predecessor Dr. T. M. Thomas Isaac that more than what was required for salary payments had been earmarked in his Budget.