The interim budget for the fiscal year 2014-15 presented by Finance Minister P. Chidambaram predictably did not contain any surprises. There has been limited leeway to announce spectacular measures either on the revenue side or the expenditure side. Whatever changes that have been proposed, such as a reduction in excise duty on many categories of automobiles, will be reviewed by the government that will take office after the general election. Yet, the last budget of the UPA-II government does not pretend to be a purely fiscal exercise, merely fulfilling the constitutional obligation of seeking a vote-on-account for government expenditure over the next few months until a new government takes office after the election. The temptation to highlight the achievements of the government permeates the Finance Minister’s budget speech. On the one side, the budget presents a healthy fiscal picture but on the other side there are no concrete measures to rein in subsidies. In fact, non-Plan expenditure has exceeded the estimates for fiscal 2013-14 even after rolling over some Rs.35,000 crore of subsidies. For the next year (2014-15) Plan expenditure has been estimated at Rs.555,322 crore and non-Plan expenditure at Rs.1,207,892 crore. Special significance is attached to the Rs.115,000-crore allocation for food subsidies under the National Food Security Act, which will be rolled out all over the country as a landmark achievement of the UPA-II government.
The government can claim credit for containing the fiscal deficit during the current year at 4.6 per cent of the GDP, below the “red line” of 4.8 per cent committed to by Mr. Chidambaram. However, some of the gloss gets diminished when one considers that the revenue deficit has remained sticky at over 3 per cent. Fiscal consolidation should not be achieved by pruning growth-inducing Plan expenditure, a point that is particularly valid in the context of the ambitious projection of a 4.1 per cent fiscal deficit for the next year. Economic growth, a key determinant of fiscal health, has been an enigma. As against the claim that the UPA-I and II governments have delivered above the trend growth of 6.2 per cent, recent indicators are not flattering. The economy is struggling to get into a GDP growth orbit of above 5 per cent. There has been a commendable improvement in the current account with the deficit projected to be at $45 billion in 2013-14 as against $88 billion last year. There is much that a new government should do in furthering this budget’s vision — insofar as they are non-controversial, and in striving for a much needed consensus in, for instance, reforming indirect and direct tax laws.