Economy on growth path: FM
Charging the previous NDA Govt with fiscal extravagance, FM said the UPA Govt has retrieved the lost ground.india Updated: Mar 13, 2006 19:04 IST
Charging the previous NDA government with fiscal extravagance, Finance Minister P Chidambaram on Monday said the UPA government has retrieved the lost ground and promised to keep tax rates "moderate and stable" to keep up the investment boom.
"Some ground was lost on the fiscal front during the previous government. We tried and retrieved that lost ground," he said adding fiscal deficit which touched a high of 6.2 per cent of GDP in 2001-02 has been brought down to 4.1 per cent, same as that in 1996-97.
Winding up the discussion on the General Budget in Rajya Sabha, he said the economy was on a "virtuous growth path" and the 20 per cent revenue growth since 2004 would ensure availability of resources for social and infrastructure sectors.
Nothing should be done to hinder the booming investment climate, the Finance Minister said.
Noting the states were sitting on huge cash reserves due to increased devolution of funds, Chidambaram appealed to them to spend from day one of the new fiscal year, that is April one, to ensure that the investment tempo is maintained.
In the first year of UPA government, Rs 74,000 crore were devolved to states which went upto Rs 94,400 crore in 2005-06 and Rs 1,13,448 crore in 2006-07, he said.
Chidambaram said Central Ministries and Departments have also been directed to spend from the beginning of the year to avoid bunching of expenditure and warned that Ministres not spending 66 per cent of allocation in the first nine months would be penalised.
Going into the economic philosophy of the budget, Chidambaram emphasised the need for wiping out the revenue deficit as targeted (2008-09) to garner additional three per cent of GDP for investment.
The revenue deficit, now at 2.6 of GDP, if wiped out will release that much money for public investment in agriculture, manufacturing and social sectors, he said.
The revenue deficit meant borrowing money for current consumption and revenue expenditure, he said adding it was for this reason there was need to contain fiscal and revneue deficit for making available more money for capital investment.
Chidambaram said the UPA government had done a commendable job in increasing tax revenue at the rate of 20 per cent since 2004.
In 2005-06, the additioanl tax revenue was about Rs 50,000 crore and it was expected to be around Rs 55,000 crore in 2006-07. "Garnering Rs 55,000 crore is not an easy task", he said.
The Minister, however, did not subscribe to the view of Left parties that the corporate sector should be taxed more saying the manufacturing and industrial sector contributed bulk of the tax collection projected at Rs 4,03,376 crore in 2006-07.
At the present rate itself, the government has been able to garner an additional 20 per cent increase in revenue and any more taxes would kill the incentive for investment in industrial and manufacturing sector, he said.
Chidambaram said it was time the service sector, which accounted for 54 per cent of GDP, contributed more.
In 2006-07, the service tax collections were projected at only Rs 34,500 crore which was less than ten per cent of total revenue collection, he said.
He said the government has done well in collection of tax arrears and the department has done exemplary work in this regard.
However, certain tax arrears are not collectable in view of litigation and cited the example of Harshed Mehta who owed Rs 28,000 crore to government.
Chidambaram said tax proposals made in the budget were done in a manner to "strike a balance" between revenue mobilisation and incentivising investment and this was not an easy task.
The Minister denied the charge that the money collected through the Education cess was not fully spent for Sarva Shiksha Abhiyan and the Mid-Day Meal scheme.
He reeled out statistics to say that since the UPA government came to power, the amount spent on these schemes was much more than what was collected through the cess and was increasing year after year.
Chidambaram said because of stringent monitoring, the plan expenditure in 2005-06 has gone up by ten per cent. As against only 55 per cent in 2004-05, it had gone up to 65 per cent this year, indicating Government's resolve to push government spending, he said.
The Miniser said allocations for National Rural Employment Scheme, Bharat Nirman, drinking water and agriculture had been substantially stepped up to hasten rural development.
He refuted opposition BJP charge that the work on the National Highway Project had been going on at a slow pace and said, on the contrary, the pace of progress has been quickened.
When the UPA government had taken over only 45 per cent of the Golden Quadrilateral work was completed and now it was almost 90 per cent, Chidambaram said.