The Hindu : Substantial cuts in budgetary allocations expected

Online edition of India's National Newspaper
Friday, Jan 31, 2003

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Substantial cuts in budgetary allocations expected

By Alok Mukherjee

NEW DELHI JAN. 30 . With the Union Finance Minister, Jaswant Singh, firm on cutting budgetary support to various Central Ministries and State Plans, a substantial reduction in the allocations in the coming budget is very much on the cards.

Against a projected demand of Rs. 1,34,000 crores forwarded from various quarters, the Finance Ministry is understood to be sticking to an overall allocation of Rs. 1,00,000 crores only, a cut of Rs. 34,000 crores. Not only that, the Rs. 1,00,000 crores funding would be lower than the Rs. 1,13,000 crores allocated by the Ministry last year, which would mean that most Ministries would not only not get any enhanced funds but could actually face a cut from last year's allocations.

The Planning Commission, which collates the Plan support for Central Ministries and the States, is now expected to work out over the next 10 days the exact requirement under individual heads. While these projections are likely to be made keeping in view the Rs. 1,34,000 crores kitty, the expectation is that the Finance Ministry would run the knife through these demands and prune them accordingly. However, the cuts are not likely to be uniform but would be prioritised — that is, some heads of expenditure would face a lower cut while others could see drastic cuts, depending on the item of expenditure.

Signals from the Finance Ministry also indicate that Mr. Singh's maiden budget presentation would not contain many surprises since the Minister has repeatedly made it clear that he wants to reduce the excessive importance attached to the annual budget presentation exercise. According to him, management of the economy is a continual affair and not a one-shot annual affair.

In keeping with this stand, Mr. Singh has already made "big announcements'' prior to the budget which in normal case could have formed part of the budget announcements. These include liberalised foreign exchange transaction norms like permitting Indians to open foreign currency accounts in local banks and investing in shares abroad, liberalised use of international credit cards and extending trading in Government securities to retail investors. Some more policy announcements are expected before the budget.

As of now, the one major item of interest in the coming budget is the Kelkar committee recommendations on direct and indirect taxes. After initial protestations, the BJP committee which reviewed these proposals has more or less fallen in line with the broad tenor of the final Kelkar proposals and sources suggest that acceptance or non-acceptance of specific recommendations would basically be guided by revenue considerations.

It is also fairly clear that Mr. Singh would present a middle-class, investor-friendly budget this time with two broad objectives — creating employment opportunities for the youth and providing some relief to the senior citizens. It is on these two initiatives that the budget-making exercise is focused this time.

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