I turn to the Budget Estimates for the next fiscal.

Expenditure & Deficit

Plan expenditure for 2006-07 is estimated at Rs 1,72,728 crore, up 20.4 per cent. As a proportion of total expenditure, Plan expenditure has increased from 26.6 per cent in 2004-05 to 28.3 per cent in 2005-06 (RE) and further to 30.6 per cent in 2006-07 (BE). This points to improvement in quality of Government expenditure. Non-Plan expenditure in 2006-07 is estimated to be Rs 391,263 crore. The increase of 5.5 per cent over non-plan expenditure in 2005-06 (BE) is due to normal growth and is one the smallest in recent years. In the Budget Estimates for 2006-07, the total expenditure is estimated at Rs 5,63,991 crore. I estimate total revenue receipts of the Central Government at Rs 4,03,465 crore and the revenue expenditure at Rs 4,88,192 crore. Consequently, the revenue deficit is estimated at Rs 84,727 crore which is 2.1 per cent of the GDP. The fiscal deficit is estimated at Rs 148,686 crore, which is 3.8 per cent of the GDP. I believe that I have redeemed my promise that the process of fiscal correction will be resumed in 2006-07.

Fiscal turn the corner

Mr Speaker, Sir, please allow me to draw your attention to two path-breaking developments on the fiscal front. Firstly, the strategy of enhanced revenue mobilisation through reasonable rates, better compliance and widening of the tax base is yielding tangible results.

For the Centre, the gross tax-GDP ratio, after rising from 9.2 per cent in 2003-04 to 9.8 per cent in 2004-05, has increased further to 10.5 per cent in 2005-06 (RE). Government estimates that, through better tax administration, it will increase to 11.2 per cent in 2006-07 (BE).

Secondly, the year 2004-05, for which the actuals are available, has proved to be a turning point. After 20 years, the Gross Fiscal Deficit is less than the Gross Budgetary Support for Plan in that year. What does this mean? This means that Government is not financing the Plan entirely through borrowing.

I was wrong

Last year, reluctantly, I pressed the `pause' button on fiscal correction. I had estimated the revenue deficit for 2005-06 at 2.7 per cent and the fiscal deficit at 4.3 per cent. I am happy to report that I have been proved wrong. We have improved upon both measures. According to revised estimates, the revenue deficit for the current year will be only 2.6 per cent and the fiscal deficit will be only 4.1 per cent.

(This article was published in the Business Line print edition dated March 1, 2006)
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