Subsidies to rise to 2.4% of GDP in FY13

Finance Minister P Chidambaram on Saturday said subsidies in 2012-13 would be around 2.4 per cent of the gross domestic product (GDP), against the Budget estimate of 1.9 per cent.

His predecessor Pranab Mukherjee had time and again focussed on this target of subsidies to realise the target of reining in fiscal deficit at 5.1 per cent of GDP this financial year.

“On the non-Plan expenditure side, the major subsidies are projected to decline from 1.9 per cent of GDP as per the Budget estimates for 2012-13 to 1.2 per cent in 2016-17. The estimated major subsidies in 2012-13 would be around 2.4 per cent of GDP, and a sharp fall as assumed in the (12th) Plan may be over-optimistic,” he said at the meeting of the full Planning Commission on Saturday.

The finance minister said direct cash transfer of subsidies in food, fertilisers and petroleum would help in reducing the burden. He said by the end of the 12th Plan, these three major subsidies would be rolled out across the country through direct cash transfers to the beneficiaries.

Chidambaram said the target of 8.2 per cent GDP growth in the 12th Plan was realistic, as in the 10th and 11th Plan periods the economy achieved a growth of 7.6 per cent and 7.9 per cent, respectively.

The finance minister also called for the need to set up a mechanism at the Cabinet level to take final decisions on major investment proposals, especially in the infrastructure sector.

The gross budgetary support (GBS) during the entire 12th Plan period has been estimated at Rs 27.1 lakh crore.

“The assumptions of tax to GDP ratio seem to be highly optimistic. The Internal and Extra Budgetary Resources (IEBR) of the CPSUs (Central public sector undertakings.) has been estimated at Rs 20.6 lakh crore, making the total resources available for the Central Plan at Rs 47.70 lakh crore. Higher IEBR would be required to meet the shortfall, if any, in the GBS,” Chidambaram added.

The finance minister called for phasing out centrally sponsored schemes, given the cost involved in administering such schemes. Of the 147 schemes currently in operation, 100 are with an outlay of less than Rs 300 crore each for the whole country.