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Updated: March 17, 2012 02:59 IST

There is resolve to keep subsidies in check: officials

  • Sandeep Dikshit
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Top Finance Ministry officials hoped that political will and regular administrative action would be instrumental in keeping a check on the expenditure on subsidies, which has led to the widest budget deficit among major emerging economies.

Drawing attention to Union Finance Minister Pranab Mukherjee proposing the containment of subsidies to less than two per cent of GDP in the next fiscal and paring it to 1.75 per cent over the next two years, Finance Secretary Sunil Mitra said, “therefore it is not business as usual…it shows the resolve especially when sharp corrections are not possible due to the situation in the country.''

Along with efforts such as regular tracking and monitoring on the expenditure side, officials reposed faith in the auditing by the Comptroller and Auditor General to keep subsidy outgo within manageable limits.

While the expenditure on the food subsidy account would be difficult to cut because of the extent of malnutrition in the country, Mr. Mitra along with other senior North Block officials at the customary post-budget briefing hoped that other subsidies like fertilizer and oil would be funded to the extent that they can be borne by the economy without any adverse implication.

Though their performance has been below par, officials complimented States on doing well with respect to Fiscal Responsibility and Budget Management (FRBM) targets. At the same time, they added the caveat that there have been huge transfers from the Centre to States, helped in part by a generous devolution package by the 13th Finance Commission.

The officials did not reveal much about the budgetary proposals for a White Paper on black money and a holding company for recapitalising banks, saying that the former was in the works and would be ready by this month-end while the latter was aimed as a long-term mechanism whose fine print was being worked out. The Centre's MoUs with banks would help make them more efficient — average productivity per employee had already increased and the quantum of non-performing assets was destined to come down — so that it would not be a case of throwing good money after bad.

Explaining the rationale for the Rajiv Gandhi Equity Savings Scheme — 50 per cent income tax deduction to new retail investors, who invest up to Rs. 50,000 directly in equities and whose annual income is below Rs. 10 lakh (with a lock-in period of three years) — the officials said the intention was to deepen the investor segment and ensure the bourses were not heavily dependent on international capital flows.

Sale of spectrum

Asked how North Block hoped to net Rs. 40,000 crore from the sale of spectrum, the officials said they were not relying on the auction of the 122 cancelled 2G licences alone. Some surplus spectrum that would accrue after Central government departments vacated it and that available over and above the 6.2 Mhz allocated to companies would also be auctioned. “We are very confident based on the timeline given by the Department of Telecommunications,'' they said.

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Doesn't taxable income and tax collection go up when GDP goes up? When tax collection goes up, will there not be more money available to support even more susidies? Why then is a subsidy beyond a certain percentage of the GDP untenable? Since such "involved" economics is beyond the understanding of even otherwise highly educated people, the Finance Minister is able to dangle some numbers or percentages before the people in his attempt to convince them that the government cannot sustain subsidies at the present level. He obviously meant subsidies to agriculture and the like and thus to the poor, since he cannot cut subsidies in various forms (tax concessions are also subsidies in other words) that reduce GDP growth.

from:  K.Vijayakumar
Posted on: Mar 19, 2012 at 12:29 IST

Why is government weighing its budget too much on the aadhar project?
The pilot project implemented in Mysore does have serious bottlenecks to
be addressed.If this mechanism is not properly corrected then the so
called "targeted subsidies" end up being on papers.A Robust system has to be in place to check the pilferages.

from:  RamanaRVLMS
Posted on: Mar 18, 2012 at 03:21 IST

The talk seems to be firming up on the 'too big to fail' rich and 'austerity' for the rest. The pace seems to be hotting up towards the Indian version of the ongoing Greek tragedy to add to the many European flavours. Where has all the originality gone? Shouldn't there be greater exposure of the continuing 'incentives'?

from:  Arvind R.
Posted on: Mar 17, 2012 at 05:38 IST
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