Finance minister gets free hand for budget reforms | india | Hindustan Times
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Finance minister gets free hand for budget reforms

PM asks ministers not to dissent and directs plan panel to abide by Chidambaram’s decision on fund allocation. Chetan Chauhan reports.

india Updated: Feb 21, 2013 07:16 IST
Chetan Chauhan

The budget 2013-14 would witness a firm stamp of finance minister P Chidambaram with Prime Minister Manmohan Singh giving him a free hand even in areas which are not the traditional domain of the finance ministry — allocating plan funds to the Central ministries and state governments for welfare measures and building infrastructure.

Chidambaram has been instrumental in unleashing the second economic reforms which saw the Sensex crossing 20,000 mark for the first time in about two years.

He had bigger plans for 2013-14 by fiscal consolidation in the budget, for which some steps were already taken. But, the demand of the Planning Commission to increase Central plan size or gross budgetary support (GBS) by around 15% for 2013-14 would have upset Chidambaram's bid to restrict fiscal deficit to 5.3% of the Gross Domestic Product (GDP).

The central plan is funded almost equally from government's own accounts or the annual budget and the resources that flow in from public enterprises. As the Central government's own revenue has not increased at the anticipated rate, meeting the plan panel's wish would have meant more loans and higher fiscal deficit.

Chidambaram was not willing to compromise on his fiscal discipline plan and the plan panel, under pressure from ministries, decided to take the matter to the PM Singh, who is also the plan panel chairperson.

Source said, the PM saw a logic in the Chidambaram's fiscal plan and did not provide much reprieve to the plan panel. Planning Commission deputy chairperson Montek Singh Ahluwalia was asked to abide by the finance ministry's decision.

The Prime Minister also ensured that there is no protest from the Central ministries to almost flat or slight increase in allocations resulting from finance ministry's decision to hike the GBS by 5.8% to Rs. 5,50,000 crore for 2013-14 as compared to Rs. 5,21,000 crore in 2012-13.

"All ministers were quietly told to accept what they get," a senior government official said. "We are just a call centre this time," was a comment of a senior planning commission official at meeting on GBS. "All decisions are been taken by the finance ministry," the official added.