Adopt corrective measures to bring down fiscal deficit-chamber

By Staff
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Google Oneindia News

New Delhi, Jan 5 (UNI) The government should adopt corrective measures to bring down the fiscal deficit to 3 per cent of GDP from 4.1 per cent in the fiscal 2007-08 and revenue deficit to 1.8 per cent from 2.5 per cent.

In a pre-budget memorandum submitted to Finance Minister PHD Chamber of Commerce and Industry (PHDCCI) has suggested that such a move would release more resources for private use while easing pressure on interest rates and taming inflationary pressures in the economy.

However before moving towards a lower fiscal deficit, it is important that the quality of deficit is protected and maintained, it added.

The chamber said the fundamental problem in arresting the revenue deficit is the huge and growing expenditure on interest payments, defence, subsidies and pension and also on the flagship social sector projects unmatched by corresponding means of raising revenue.

The control of fiscal deficit would mean a more creditable programme on expenditures reform which would include downsizing of government, rationalising and better targeting of subsidies, especially food and fertilisers, application of user charges for economic and social services, trimming of government bureaucracy and eliminating losses of PSUs.

The government, according to the chamber, should also rein in its borrowing programme to provide a momentum to the ongoing growth process. Fiscal rectitude in controlling non-priority expenditure is important especially at this juncture, considering that a large outgo is expected due to Pay Commission Award in 2007-08 and a limit to which this burden would be offset through increasing tax collections.

PHDCCI has suggested that the government could contemplate incurring expenditures, especially on the revenue account, only if it is confident of augmenting revenue by improving the tax GDP ratio to at least 12 per cent of GDP.

This is of utmost importance if larger expenditures are to be supported within a sustainable fiscal framework. Broadening of revenue base by increasing the number of tax payers through improved tax administration and by expanding the coverage of services in the net will help in this direction, PHDCCI noted .

UNI

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