Unpretty Picture

THE interim budget presented by the new finance minister last week has brought out the comprehensive deterioration of the .government's fiscal position in 1997-98 under the United Front regime. As per the revised budgetary estimates for the year, the fiscal deficit shot up to 6.1 per cent of GDP compared to former finance minister P Chidambaram's ambitious target of 4.5 per cent and the deficit of 5.4 per cent in 1995-96, immediately preceding the assumption of office by the UR Even after making allowance for the unexpected spurt in small saving collections, the larger part of which is passed on by the centre to the states as loans, the centre's fiscal deficit is put at 5.8 per cent of GDP. The deficit on the revenue account has ballooned to Rs 43,686 crore from the budget's target of Rs 30,266 crore and the deficit of Rs 32,654 in 1996-97, The rise in the deficit has occurred despite the government's total expenditure having been more or less held down to the budgeted level. Here it is the further deterioration in the quality of government expenditure that deserves notice: Plan expenditure, representing outlays of a more or less developmental nature, having slipped to 25,8 per cent of total expenditure from the budgeted level of 27.1 per cent and the 1996-97 level of 26.6 per cent the combined outcome of non-Plan expenditure exceeding the budgeted figure by 4.3 per cent and a shortfall of 3.5 per cent in Plan spending. The reason for the rise in the fiscal deficit was essentially the failure of the government's revenue, specifically its tax revenue, to come up to budgetary expectations, with customs falling short by as much as 22 per cent, income-tax by 13.8 per cent, excise duties by 8.6 per cent and corporation tax by a nominal 2.3 per cent. The shortfall in customs revenue has been attributed to lower than expected import volumes and prices, especially of petroleum products the shortfall in receipts on whose account alone has been put at about Rs 4,000 crore. The outcome in regard to excise duties has been taken to reflect the slowing down of industrial growth.