• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

Govt Mulling Restricting Subsidy To Contain Deficit

Photo Credit :

The government is proposing to restrict subsidies and introduce medium-term expenditure management framework to contain fiscal deficit, Parliament was informed on 6 September.

"Government has proposed to introduce medium-term expenditure frame work statement, setting forth a three year rolling target for expenditure indicators.

"This is with a view to undertaking a de-novo exercise for allocating resources for prioritised schemes and weeding out others that have outlived their utility," minister of state for finance Namo Narain Meena said in a written reply in the Rajya Sabha.

He said the proposed move would encourage efficiency in expenditure management.

"Government also endeavours to restrict the expenditure on central subsidies. Similar steps are expected to be continued in the coming years to contain the fiscal deficit," Meena added.

The government's move to control expenditure comes in the backdrop of the fiscal deficit reaching over 50 per cent of the target for the whole year of 2012-13.

In absolute term, fiscal deficit -- the gap between revenue and expenditure -- stood at Rs 2.64 lakh crore in the April-July period.

Earlier this year, to rationalise finances, the government had imposed a 10 per cent cut in non-plan expenditure and restrictions on foreign travels, among other things.

The Centre hopes to bring down the deficit to 5.1 per cent of GDP in the current fiscal, from 5.8 per cent in the previous year, but the task seems difficult in view of rising oil, food and fertiliser subsidy bills.

A government appointed committee, headed by former chairman of Finance Commission Vijay Kelkar, has submitted its report suggesting a roadmap for fiscal consolidation.

Plan Panel Cuts Annual GDP Growth Target To 8.2% For 12th Plan
Meanwhile, in view of fragile economic recovery, Plan panel has decided to lower annual average economic growth rate to 8.2 per cent in the 12th Five Year Plan (2012-17) from 9 per cent envisaged earlier.

"The panel will propose the annual economic growth rate target of 8.2 per cent for the 12th Plan. The issue will come up for discussion at the meeting of the Full Planning Commission, to be presided over by the Prime Minister, on September 15," a source privy to the development said.

As per the proposal, the Commission would aim to achieve Gross Domestic Product (GDP) growth rate of 9 per cent in the terminal year (2016-17) of the 12th Plan.

Once, the full Planning Commission approves the growth target, it would be vetted by the Union Cabinet and then it would be placed before the country's apex decision making body National Development Council (NDC) for final approval.

The NDC is headed by the Prime Minister with all chief ministers and union cabinet ministers on board. It is the final authority to finalise the five-year policy document.

In Approach paper to the 12th Plan, approved last year by the NDC, the Commission had envisaged 9 per cent annual average growth rate during the five-year period. The target is now being lowered in view of the global problems.

Showing persistent sluggishness, India's economy grew by 5.5 per cent in the April-June quarter, mainly on account of poor performance of manufacturing, mining and farm sectors.

The gross domestic product (GDP) had expanded by 8 per cent in the April-June quarter of 2011-12.

Besides, the economic growth in the January-March quarter last fiscal was at nine-year low of 5.3 per cent.

The economic growth rate in 2011-12, the terminal year of 11th Plan, slipped to nine-year low of 6.5 per cent.

During the 11th Plan, the average annual economic growth rate has been estimated at around 8 per cent as against the target of 9 per cent.


Top themes and market attention on: