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Journalism of Courage
Advance estimates released by the Central Statistical Organisation show GDP growth of 7.2 per cent in 2009-10. This is good news. It suggests that the Indian economy has been able to get back on track to above 7 per cent growth despite the difficulties caused by the global recession
and the fall in exports. In the previous year,2008-09,CSO estimates released last week showed growth of 6.7 per cent.
The finance minister also has to worry about the fiscal deficit. There are many elements of government expenditure where the government has few degrees of freedom. For example,administrative expenditure,salaries and interest payments are obligatory. Once subsidies have been initiated,they are very difficult to roll back. If the recommendations of the Parikh committee on oil prices are accepted,it would reduce some of the deficit. But if the government continues to set oil prices,there could be an increase in subsidies in case oil prices rise further during the year. Tax revenue growth will not rise unless industry grows much faster. The finance minister can roll back some of the excise duty cuts made after the crisis. But more than a few rollbacks,the government may have to rely on disinvestment numbers to get a lower number for fiscal deficit. In terms of the fiscal deficit figures in percentage terms,since thats what the world worries about,the change in the GDP base year implemented by the CSO last week,which makes the denominator bigger,will help make the deficit ratio smaller.
