Finance Minister Pranab Mukherjee’s budget proposals with the biggest deficit reduction in nearly two decades were passed on Thursday,
barring token concessions to housing, airtravel, planters and healthcare.
The government stuck to its stance on raising duties on petroleum products to reduce the strain on the exchequer, which the opposition parties termed inflationary. The concessions will shave off Rs 400 crore from the government’s estimated revenue.
“Instead of duties, I could have taken the administered price mechanism route, but I did not do so, because, to me, it would not have been correct,” Mukherjee said in his reply to the debate on the Finance Bill in the Lok Sabha.
Mukherjee, who is back to managing the finances of the nation after a quarter of a century, is treading with caution to build the revenues of the government by slowly rolling back the tax concessions and bringing in more services under the tax net.
Containing inflation is also on top of his agenda. Fiscal deficit is estimated to fall to 5.5% of the gross domestic product. The economy may grow 8.5% this fiscal and more than 9% next year.
The concessions will reduce the incidence of service tax on housing and air travel, incentivise construction of big hospitals, keep cancer and anti-AIDs drugs cheap and provide relief to debt-ridden coffee growers. But that did not satisfy the opposition parties which walked out of the house.
Mukherjee defended the decision saying that it would also benefit the states, some of which are ruled by opposition parties. States would get a 32% share of higher duties which may be Rs 26,000 crore. But these actions alone may not be enough to keep interest rate and inflation stable as it is poised to borrow Rs 3.81 lakh crore for the year.
“Notwithstanding lower budgeted government borrowings in 2010-11 than in the year before, fresh issuance of securities will be 36.3%, higher than in the previous year,” Reserve Bank of India governor D Subbarao said on April 20. This presents a dilemma,” for the central bank.
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