Economy
Fiscal deficit widens despite rising revenues: Morgan Stanley

High inflation and increased subsidies have led to higher government expenditure—much over the budgeted amounts, widening the fiscal deficit

 
High inflation and high interest rates are not only punishing the public but also the government in Delhi. In spite of rising tax revenue collections, growth in government expenditure has accelerated above budget estimate, according to a Morgan Stanley Research report. There is no let-up in the government subsidies to farmers and urban households in fertilisers and oil, respectively. Consequently, the government faces the problem of widening fiscal deficit. The Reserve Bank of India (RBI) has warned that the fiscal deficit target, currently at 5.1% of gross domestic product (GDP), may be in trouble “due to likely overshooting of subsidies and shortfall in receipts”. This would require the government to borrow more money, further restricting the RBI’s space for easing liquidity. 
 
The central government’s aggregate gross tax collections growth decelerated to 25% y-o-y (year-on-year) in April-June 2012 from 37.7% in April-May 2012. However, this is higher than the budget estimate of gross tax revenue growth of 21% for FY13. Similarly, growth in net tax collection (after transfer of state government’s share) decelerated to 32.8% y-o-y in April-June 2012 (vs 77.1% in April-May 2012). This was higher than the budget estimate growth of 22%. The deceleration in April-June 2012 vs April-May 2012 was mainly due to deceleration in growth of corporate tax in June vs May and April 2012.
 
Morgan Stanley Research expects that the weakening economic activity will keep revenues from corporate income tax and indirect tax (excise and customs) down in FY13. 
 
The total expenditure growth for the government accelerated to 19.3% y-o-y in April-June 2012 from 14.8% in April-May 2012. This was higher than the budget estimate target of 14.8% y-o-y for FY13. Revenue expenditure grew by 20.3% compared with the budget estimate of 12.7% y-o-y, while capital expenditure grew by 12.5% compared with the budget estimate of 30%.
 
Morgan Stanley Research believes that slower indirect tax collection growth combined with continued high growth in government spending will push the fiscal deficit higher than the budget estimate. It expects that the central government’s fiscal deficit will be 5.6% of GDP in FY13 against the budget estimate of 5.1%. Further, it is expected that the consolidated national fiscal deficit (including off-budget expenditure) will be 8.5% in FY13 compared with 9% in FY12.
 
Overall, the depreciating rupee against the US dollar and the widening fiscal deficit of the government may reinforce one another leading to higher inflation and higher interest rates. This will punish both the common man and the industrialist. 
 

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Raise minimum EPF pension to Rs5,000: Tharoor

According to the former Union minister, existing minimum pension of the EPF scheme is 'totally inadequate' for over 3.5 million who had spent their entire working life

 
Thiruvananthapuram: Congress MP Shashi Tharoor has urged the Indian government to enhance the pension under the Employees Provident Fund (EPF) scheme to at least Rs5,000, reports PTI.
 
The existing minimum pension of the scheme was 'totally inadequate' for over 3.5 million under the scheme who had spent their working life in the most productive sectors of the national economy, he said in a statement.
 
"There are cases of pensioners with 40 years' service receiving Rs550 a month. The basic pension should be raised to at least Rs5,000 a month," the former Union minister said.
 
He also wanted the Dearness Relief linkage to be provided on the pension as granted to all other pensioners. Otherwise, the scheme would not serve any purpose since the increase in cost of living would not be accounted for, he said.
 
 

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COMMENTS

CA PRADEEP AGARWAL

4 years ago

They will do anything for vote bank politics, if members unite and become vote bank then everybody will be vying to appease.

ghatty sai

4 years ago

all state govt and central govt employees are drawing their pensions based on increase in Da.Only we the pensioners under EPF have not been getting these benefits.we do not have any medical benefits etc as state and central govt employees have. will Mr Chidambaram do some thing for us in this budget as getting more pension.Request all political parties to do something for all of us.Was there any change in reviewing this after this was introduced in 1970?

ghatty sai

4 years ago

will the congress and other parties please listen to him and do something to us.

M G WARRIER

5 years ago

It is soothing to find that people who can influence opinion in Delhi come out in support of a cause for which there are few takers in the political leadership. EPFO pension goes to beneficiaries who have spent their better part of lives working in factories and companies which sustained economic development. Their social security is nation's responsibility.In this context GOI should review all social security schemes for the elderly to make them serve the purpose for which they were designed.

No negotiation if fasting activists forcefully removed: Hazare

With the government showing no inclination for talks to end their stir, a worried Team Anna held discussions on Wednesday morning while requesting Kejriwal and Rai to end their hunger strike

 
New Delhi: As the health of his aides deteriorated, Indian social activist Anna Hazare on Wednesday warned the government that he will not negotiate with them if the fasting activists are forcefully removed from the 'Jantar Mantar' protest site, reports PTI.
 
Hazare and his associate Arvind Kejriwal said they saw a conspiracy to take the activists to hospital to end the stir for a strong Lokpal.
 
Kejriwal, whose health deteriorated along with that of Gopal Rai on the eighth day of their fast, said that it will be protesters' responsibility to get him out of the facility if he is forcibly taken there.
 
With the government showing no inclination for talks to end their stir, a worried Team Anna held discussions on Wednesday morning among its members on the way ahead and decided to adopt a tough stand.
 
Team Anna requested Kejriwal and Rai to end their hunger strike and let other members carry on with the stir but the activists refused to budge.
 
A Team Anna member said they requested both Kejriwal and Rai but they did not budge from their position and that they will continue with the fast.
 
In the meeting, it was also suggested that some other Team Anna members sit on fast in place of Kejriwal and Rai.
 
After the meeting, Hazare told protesters that he will not call off his fast till a strong Lokpal bill is passed.
 
"A man may commit suicide when he is in trouble. What is troubling Arvind? He is fighting for the country. And this fight is creating trouble for the government and there could be a conspiracy to take them to hospital. But this won't work."
 
"If the government forcefully removes them, I will not talk to anybody in the government. Till we have the strength, we will carry on with the protest," he said.
 
Kejriwal said he does not have trust in the government doctors and refused to share medical reports with them from Wednesday.
 
"There is a conspiracy to forcibly take me to hospital. I don't have trust in government doctors. If they take me forcefully, then it is your responsibility to get me out of it," Kejriwal said.
 
The team held two rounds of talks at the protest site, where Hazare's fast entered the fourth day and that of Kejriwal, Rai and Manish Sisodia the eighth day.
 
After being advised hospitalisation, Kejriwal on Tuesday had warned the government against using force to remove him and his associates from the protest site.
 
Addressing protesters this morning, Team Anna member Kumar Vishwas said the health condition of Kejriwal and Rai was "serious". "The whole country is concerned about their health," he said.
 
The crowd count in the morning was low as rain kept the protesters away from the venue.
 
Asked what the members were planning to do keeping in view the deteriorating condition of the activists, a Team Anna member said, "Wait and watch." 
 
Miffed over the government not initiating any dialogue process, Hazare on Tuesday had ruled out talks with even the Prime Minister to end their stir. He also threatened to return Padma Bhushan bestowed upon him as a mark of protest.
 
Team Anna member Prashant Bhushan targeted the government for not initiating a dialogue with the group, alleging that they want people like Hazare to die so that they can continue to "loot" the country.
 
"The government said they were not ready to talk to us.
 
This is their attitude. They have utmost disrespect for the people. They want people like Anna, Arvind, Manish and others to die so that they can continue their loot," he alleged.
 
Hazare began his indefinite fast against corruption on 29th July by joining his three aides - Kejriwal, Sisodia and Rai, who have been fasting since 25th July.

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