The Hindu Business Line : Roadmap for elimination of revenue deficit on agenda

A DETAILED roadmap laying down specific milestones for achieving a zero revenue deficit by 2008 would be among the first policy initiatives to be unveiled by the new United Progressive Alliance (UPA) Government at the Centre.

This is seen to be in line with the Prime Minister-elect, Dr Manmohan Singh's statement on Wednesday that his Government is committed to "responsible macroeconomic policy".

According to officials, while the Fiscal Responsibility and Budget Management (FRBM) legislation enacted in July last year, mandates the elimination of the Centre's revenue deficit by 2008, it does not, however, shed light on how this goal is to be accomplished.

"The roadmap would have projections of revenue and expenditure under different heads for each year, while also spelling out the complementary fiscal and related policy measures necessary to meet these targets," they said. It is learnt that a taskforce under Mr Vijay Kelkar, Advisor to the outgoing Finance Minister, Mr Jaswant Singh, is already on the job of preparing the roadmap.

In all likelihood, the roadmap would be ready before the Union Budget, which is likely to be presented around mid-July. In fact, the roadmap is expected to serve as some kind of a background, against which the UPA Government's first Budget would be unveiled. Significantly, the Congress' election manifesto has promised to come out with a detailed roadmap for eliminating the revenue deficit "within 30 days of coming to power so that a national consensus is also created."

"From our side, we would like this to be incorporated as part of the Common Minimum Programme document of the UPA as well, so that it becomes the basis for the Government's economic policy," said Mr Jairam Ramesh, Secretary of the Economic Affairs Department of the Congress.

As per the revised estimates for 2003-04, the Centre's revenue deficit — the difference between its aggregate current revenue expenditures and total tax and non-tax revenue receipts — stood at Rs 99,860 crore.

If the deficit were to be eliminated even over five years, as stated in the Congress manifesto, it would require shaving of about Rs 20,000 crore per year. The enormity of the task becomes evident when one considers that the last five years since 1999-2000 have seen the revenue deficit soar from Rs 67,596 crore to Rs 99,860 crore, which is now sought to be slashed to zero over the next five years.

Moreover, this reduction will have to be in a context where the Centre's Customs revenues are expected to take a hit on account of the stated policy to bring down import duties to Asean country levels. On the expenditure side, too, there is little flexibility on heads such as interest payments, which, in the past five years, have gone up from Rs 90,249 crore to Rs 1,24,555 crore in 2003-04 and are budgeted at Rs 1,29,500 crore this fiscal.

In the event, the Centre may have to opt for measures such as widening the ambit of service tax through a comprehensive Goods and Service Tax legislation, doing away with area, product and sector-based exemptions, rationalising subsidies and reforming the existing salary-cum-pension structure for Government employees.