INDIA:FM holds pre-budget meeting with state Finance Ministers


13 jAN 2010 14:42 IST
Finance Minister, Shri Pranab Mukherjee held a pre-Budget meeting with the Finance Ministers of States and Union Territories, here today to deliberate on issues that would have a bearing on the annual Budget for 2010-11. In his inaugural speech, Shri Mukherjee said that this meeting is a unique exercise and provides valuable input s to Finance Minister to formulate General Budget and expressed hope that this meeting with the Finance Ministers of States becomes an annual feature.

Addressing the meeting, Shri Mukherjee said that economic revival is necessarily a collaborative effort of the Union and State Governments. When the Budget 2009-10 was presented in July 2009, the Indian economy was going through a very difficult phase due to the adverse impact of global financial meltdown. The Government revenue had dipped because of slow down in the economy and due to the tax concessions given as a part of the Government’s policy response to the crisis. Despite several constraints, the Government allocated an additional amount of Rs. 40,000 crore for the current year’s annual plan over and above the Interim Budget. This additionality was primarily for Bharat Nirman schemes like, PMGSY, IAY and other important schemes like, NREGS, NRHM, JNNURM etc. It was in line with the suggestions made by the State Finance Ministers in the last pre-budget meeting to enhance allocation for rural infrastructure schemes. Similarly, to enable the States to meet their annual plan targets, the fiscal deficit limit was enhanced to 4% of States’ GSDP. This relaxation enabled the States to avail of additional borrowings to the tune of Rs. 21,000 crores. This too was in line with the suggestions made during the last pre-budget meeting, added the Finance Minister.

The Minister stated that the impact of these measures and the overall fiscal stimulus of the Central Government have started showing results with GDP Growth in the 1st Half is averaging to 7% and it is estimated that GDP growth in the current fiscal will be around 7.75%, which exceeds the initial estimates as well as RBI’s estimate.

The Finance Minister observed that high levels of public spending and decline in revenue streams have resulted in deviation from the FRBM targets and highlighted the need to return to a path of fiscal consolidation at the earliest without compromising the growth momentum and in the long term interest of the economy. Shri Mukherjee expressed hope that the implementation of Direct Taxes Code and GST, would lead to broadening of tax base, simplification of the tax structure and improvement in tax compliance.

Expressing concern over the increase in food prices including that of rice, wheat, pulses, vegetables etc. which is sorely affecting the common man and his Budget, the Finance Minister said that the price rise in sugar could be attributed to demand side issue, but the price rise in rice, wheat, pulses, vegetables etc. is primarily a supply side issue that need to be collectively addressed both in the short and the medium to long term. WPI index increased by 19.79%. Therefore, collaborative efforts of the Central and State Governments required to tackle this problem, he added.

Emphasizing that there are enough wheat and rice stocks, the Finance Minister highlighted the need to address the problem of distribution to arrest the price rise in food items. He said that there is a need to properly monitor not only the release of food stocks but also the sale of such food stocks in open markets. Effective management of supply chain and an increase in the off take of wheat and rice from the Central Pool would ease the pressure on prices of food products. Upto 10th January, 2010, States have lifted only about 1.59 lakh tonnes against 10 lakh tonnes of wheat allocated for sale to retail consumers under Open Market Sales Scheme (OMSS). Similarly, only 2.9 lakh tones of the rice has been lifted, as against 5 lakh tonnes allotted to States. The allotments under OMSS have been further increased by 10 lakh tonnes of wheat and 5 lakh tonnes of rice. The Minister asked the state governments to cooperate in this regard to lift these surplus stocks allotted to them and highlighted the need to strengthen the public distribution system in the country.

The Finance Minister highlighted the need to increase agricultural productivity. He said that the Government has tried to arrest, and in fact improve the declining trend in public investments in agriculture during the last five years. He emphasized the need to take this forward and invited suggestions including the scope for Public Private Partnership in improving the effectiveness of public investments in the agriculture and to ensure that Indian agriculture can grow at an annual rate of 4%.

Shri Mukherjee said that the rising fertilizer subsidy and its unintended impact is a major area of concern. To mitigate the impact of current practices of fertilizer subsidy we are in a process of developing a new system of fertilizer subsidy, which may involve a direct transfer of subsidy to the farmers and also a system which promotes nutrient based subsidy regimes. He invited States views on the issue.

Finance Minister said that the National Rural Employment Guarantee Scheme (NREGS) is a major initiative to directly address chronic poverty and unemployment in rural India. The success of this programme has helped in mitigating the adverse impact of the crisis. In fact I would go to the extent of saying that the momentum in rural economy has helped a relatively quick recovery of growth in the country. We need to replicate the successful models in other areas also to eliminate the stigma of having the highest number of poor people in our country, Finance Minister added.

As large segment of our country continues to suffer from lack of access to electricity, the Government has launched a massive rural electrification program along with National Solar Mission, Bio-Mass and Wind Energy program in the country to provide alternate sources of energy. This alternate source of energy though expensive in comparison to the conventional sources of energy, are best suited to reach the areas where it has not been possible to provide electricity through conventional means so far, said the Minister.

Highlighting the global environmental challenges, the country is facing today, Shri Mukherjee said that mitigation and reduction of green house gases involves a heavy cost in terms of technology upgradation and also in terms of access to alternate sources of energy which, at present, are more costly than the conventional sources of energy. However, we are morally bound to protect the environment for our future generations to have them access to clean and safe mother earth. Therefore, non-Conventional energy sources need to be tapped and must be given focus and brought into operation. The government has already started many programmes in this area and in future also we need to initiate many more such programs. The success of these programs will require a partnership of Central and State Governments along with public and other non-Governmental stake-holders, he added.

Shri Mukherjee observed that the daily statement of the ‘ways and means’ position of the State Governments shows that some of the States are holding large cash balances and highlighted the need to utilize these cash surplus in the State Government in Development activities. The Finance Minister exhorted the states to come forward to create an India which is self sufficient and hunger free.