Govt to bring down subsidy bill to 1.75% of GDP in 3 yrs
New Delhi: The government on Monday said it proposes to bring down expenditure on subsidies towards food, oil and fertilisers to 1.75 percent of the GDP in the next three years, from 2 percent estimated in 2012-13.
"...would restrict the expenditure on central subsidies to under two percent of GDP in 2012-13. Over the next three years, it would be further brought down to 1.75 percent of GDP," Minister of State for Finance Namo Narain Meena told the Rajya Sabha in a written reply today.
Attributing fiscal slippages to revenue shortfall and high subsidies, Meena said the fiscal deficit for the current fiscal has been revised to 5.9 percent of the GDP from 4.6 percent estimated earlier.
For 2012-13, the government proposes to bring fiscal deficit down to 5.1 percent of the GDP and reduce outgo on major subsidies to Rs 1.79 lakh crore from Rs 2.08 lakh crore estimated in the current fiscal.
The Minister further said that the fiscal deficit of the government remained high since 2008-09 -- the year the financial meltdown impacted the global economy.
Justifying the government's decision to contain fiscal deficit, he said, "slippage in the fiscal deficit has been adding to inflationary pressure and it continues to be risk for inflation."
He further said, "The increase in fiscal deficit could potentially crowd out credit to the private sector" and impact the private investment.
The efforts, he said, were also being made to raise the tax-GDP ratio and lower expenditure to bring down fiscal deficit.
Finance Minister Pranab Mukherjee in his budget proposed to raise an additional Rs 41,000 through tax proposals including 2 percentage points hike in excise and service tax.