Govt may slash non-Plan spending

According to sources, finance minister Yashwant Sinha, who had to eat humble pie on many an occasion by rolling back hard decisions under political pressure, was now determined to tame subsidies which had assumed menacing proportions and was threatening the fiscal health of the nation.

Although the government had planned to curtail non-Plan expenditure by 10 per cent during the financial year, it did not happen because of various pressures and roll-backs, sources added.On the other hand, expenditure compression had mostly remained limited to the Plan side, which the government had pledged to increase, to give a boost to the economy.

Expenditure figures reveal that by December end, the government had exhausted about 70 per cent of the budgeted non-Plan expenditure for the fiscal. However, on the Plan side, the government managed to utilise less than 60 per cent of the budget funds till the end of December.

The increase in expenditure, especially on the non-Plan side had led to high fiscal deficit. The slack in indirect tax collections added to the woes.

The deteriorating fiscal health of the Centre and the states was one of the key points of discussion at the recently-concluded NDC meeting. The members at the meeting had appreciated the urgency of taking hard decisions to restore the health of the economy.

The President too, in his address to the joint session of Parliament painted a grim picture of the economy, and underlined the need for tight control overquot;wasteful and low-priority expenditurequot; and suggested reduction in fiscal and revenue deficit.

According to sources close to the finance minister, the President8217;s address was a precursor to the budget, which would, at least in part, endeavour to correct the priorities of the government.

The focus would be on expenditure control, apart from tightening and streamlining the tax structure for bridging fiscal deficit. The President, on his part, had warned that deteriorating fiscal position would adversely hit interest rates, investment and growth. He also suggested to make users pay for services.

Although the Centre cannot do much as far as power tariff and irrigation charges are concerned, it is expected to target pruning fertiliser and food subsidies. The total subsidy bill for the current fiscal was pegged at around Rs 20,000 crore, which was likely to go up marginally, despite the Government8217;s declared intention to reduce Non-Plan expenditure by 10 per cent.

According to sources, the pre-budgetpronouncements by the Prime Minister and later by the President, has strengthened the case for the finance minister who was earlier forced to roll back several hard decisions under political pressure.