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Budget to address privatisation, widen tax net: Analysts

Accelerated privatisation, expenditure control and broadening of this fiscal's general tax net are some of the major issues that are to be tackled by the Union Budget on Wednesday.

Quoting the observations made in the Annual Economic Survey, analysts from financial research institutions said, most of the positive expectations from the Budget proposals are being discounted by the markets. The Economic Survey, which is widely regarded as an indicator of the Budget's stance, has confirmed most the market's expectations such as lower marketing borrowing programme by the government and rates of return on small savings, provident and pension fund to be linked to the inflation and tax-adjusted market rates.

Ashish Pitale from J P Morgan Group said that next year's fiscal deficit would be marginally higher than this year's in absolute terms and lower in terms of proportion to gross domestic product (GDP)-- 4.8 per cent of GDP as compared with 5.1 per cent of GDP estimated for this year.

The finance minister is expected to show a market borrowing number for next year, which is actually lower than the current year.

However, a larger repayment obligation in the year 2001-02 would push the government's gross market borrowing requirements to a projected Rs 1175.04 billion, marginally higher than in the current financial year, Pitale said.

Sanjeet Singh from ICICI Securities and Finance Company said, the good results achieved on the fiscal front this year are expected to continue in the coming fiscal year. Despite the industrial slow down, efforts to widen the tax net and higher compliance rates would keep tax revenues buoyant though the growth might be at a pace somewhat lower than this year.

Moreover, the government's recent initiatives on the divestment front would see sharply higher collections under this head too. Expenses are also likely to be kept under check and the Fiscal Responsibility Bill would enforce strict discipline in this regard.

Majority of the analysts felt that for the first time in several years the government's deficit target for 2000-01 is likely to be met because of strong tax revenue realisation and prudent expenditure management. Cost savings are estimated to have arisen mainly from lower defence related expenditure this year as compared to the previous two years.

While last month's Gujarat earthquake is unlikely to have a significant impact on the Budget, they said, the shortfall in privatisation proceeds would be offset by better than projected revenue receipts and lower than estimated non-plan expenses.

On the financial front, analysts said that the Reserve Bank of India is expected to lower the key bank rate by another 50 basis points to seven per cent in April following certain ''feel good factors'' emanating from Wednesday's Budget proposals.

Overall, the balance of payment is likely to post a surplus of over $6 billion in the fiscal 2001-02 with the rupee continuing to remain stable around Rs 48.50 per dollar.

C Parthasarathy, chairman and managing director of Karvy Consultants Limited, said that the task of phasing out non-merit subsidies on cooking gas and electricity is likely to begin in tomorrow's budget. The Department of Divestment is likely to be vested with more powers, lesser procedures and a higher target of Rs 250 billion for fiscal 2001-02.

The Union Budget is being presented at a time when the US economy is threatened with a slowdown and India's index of industrial production is a cause of concern. The fiscal deficit situation both at the centre and states is worsening. With all these imperatives, he said that the finance minister would have to address the key issues such as elimination of revenue deficits, higher interest payments, wages, salaries and subsidy payments.

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