Keeping the recent fiscal track record in mind, there were no great expectations of immediate reforms in a pre-election year Budget.

But a cause for worry is that the Budget did not reflect any concern over specific fiscal problems, and the need for corrective steps to be taken at least in the medium-term.

The Budget estimate for 2013-14 projects a revenue deficit of 3.1 per cent of GDP and fiscal deficit of 4.8 per cent of GDP in 2013-14. The Medium Term Fiscal Policy estimates these as 2 per cent and 3.6 per cent in 2015-16. The statutory deficit targets fixed by the FRBM Act 2003 will not be met even after twelve years.

It would not be correct to blame the recent global economic downturn as the sole cause of our present economic condition of low growth, high inflation and current account trade deficit.

The remedy is to improve investor confidence for domestic and foreign investment.

Fiscal stability in the medium term is a crucial requirement for addressing macro-economic imbalances. A way of assessing the latest Budget is its whether its measures are capable of containing inflation and promoting growth.

The fiscal issues before the Finance Minister are: rationalisation of expenditure, improving Budget implementation and raising additional revenue without hurting growth.

The Budget speech does not even mention the specific issues and remedial steps envisaged in the Medium Term Fiscal Plan up to 2015-16.

Expenditure rationalisation

All non-essential and non-productive expenditure, Plan and Non-Plan, have to be eliminated. The explosion of Plan schemes calls for a review, as the Finance Minister pointed out in an earlier Budget speech. To cite an example, the Mahatma Gandhi National Rural Employment Guarantee Scheme is reported to be affecting availability of workforce for agriculture, which is all the more worrying when food shortage has to be faced.

Essential non-Plan expenditure, such as maintenance of assets created under Plan, has to be provided for. It will be pertinent to know the results of Zero-Based Budgeting prescribed in the Budget Manual.

A Proposal for non-Plan loan to 8 sick PSUs which are unable to pay wages of employees since last year is reported to be under consideration.

A review of all such units for possible closure is necessary, especially in view of unutilized land owned by them.

According to a report for May 2012, cost overruns amounted to Rs 52,445 crore for projects in many sectors -- 28 in power, 36 in Railways and road transport and 84 in highways.

Revenue mobilisation

Revenue foregone due to tax concessions and exemptions is estimated at Rs 5.73 lakh crore for 2012-13. The estimate for 2013-14 is not given. Whether the concessions are delivering the results expected needs to be reviewed.

Improvement of tax administration, including speedy disputes settlement, is needed to reduce tax arrears.

A law such as GST has to be enacted and implemented without further delay.

A specific tax proposal is the imposition of 5 per cent surcharge on corporate tax paid by Indian companies. This may perhaps be reviewed in the interest of consumer confidence for investment.

A few suggestions

A ‘fiscal responsibility index’ can be devised, based on the fiscal parameters briefly indicated above. This may facilitate an internal assessment of fiscal consolidation, instead of waiting for ratings by external agencies.

Reliability of expenditure estimates in the budget can be improved to avoid understatement -- for example, in subsidies. Accrual accounting instead of cash accounting will help.

The Medium Term Fiscal Plan has to be supported by breakdown data and assumptions. The roadmaps so far have not been supported by necessary data and assumptions.

A special discussion in Parliament may be arranged on the implementation of the FRBM Act, 2003.

The author was Joint Secretary in the Union Government and IMF Budget Adviser

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