Experts suggest expenditure recast on budget eve

"The top priority for the government in the forthcoming budget must be keeping a reasonable target for fiscal deficit… Given the deficit, expenditure restructuring should be accorded a high priority," says National Institute of Public Finance and Policy (NIPFP) professor D K Srivastava.

While subsidies–explicit and implicit–should be reduced, the regime of indirect taxes needs to be reformed to make it simpler, less distortionary and more growth-oriented, says Srivastava, also principal consultant to the 11th finance commission.

The recent move onraising the price of ration food for people above the poverty line sent "a positive political message on subsidies but the government should now go in for ensuring productivity of its staff and also spread the tax net to effectively include the affluent farmers as well as the service sector," says National Council for Applied Economic Research chief economist Subir Gokarn. Similarly, Jay Dubashi, a leading member of the BJP economic think-tank, suggests that fiscal imbalance needs correction and it’s high time to "take a close look at taxing agriculture".

"For the budget you need a strong long-term direction of economy within which you have to take short-term measures to kickstart growth," says Dubashi observing that fiscal correction is a long-term exercise and the government should convey to the country that populist measures are not in national interest.

With industrial sector barely recording a growth of 4 per cent and people just not going in for buys, the finance minister "will have to createdemand" by reducing excise duties, says Dubashi.

Along with reduction in excise duties, which are in the range of 18 per cent, the state could do well with a rise in import duties of certain goods like steel so as to promote indigenous goods, he suggests. Gokarn notes that raising import duties would go against the spirit of liberalisation, but Dubashi argues that even countries like USA have put trade barriers to protect their own industry.

While the Prime Minister has hinted at higher education becoming dearer, Gokarn suggests that a surcharge of 5 per cent for the top income bracket and levies on luxury services like super speciality hospitals can be a useful means of raising income without pinching the poor.

"There’s a strong feeling that the rural people have been ignored," says Dubashi, adding that the government should pay more attention to the rural sector.

While refusing to express his expectations in figures, he says there should be increased outlays in spreading health services, education,village roads, small dams and overall rural development.