Budget To Increase Public Expenditure

This Budget, we will be able to see a major ramp up in public expenditure in order to enhance physical infrastructure and increased social sector spending. A fiscal impetus can also be provided through a cut in indirect tax rates.

The FRBM Act mandates the government to decrease the fiscal deficit to at least 3 per cent and reduce revenue deficit to zero by March 2009. The Planning Commission is opposed to such constraints on public expenditure as it limits the government’s ability to fund flagship initiatives aimed at developing rural infrastructure.

There is a greater need of infrastructure development in rural areas then in the urban area where there is already a lot of private investment in infrastructure. Private players show little or no interest in rural areas because such projects will be unprofitable for them. If the Government develops a base in rural areas on the infrastructure front, it will be able to draw private participation also.

It is expected that the public expenditure will rise sharply in the upcoming Budget. While the total Budgetary support for the Central Plan increased by 22 per cent during 2007-08 (Budget estimate) as compared to 2006-07 (revised estimates), the 11th Plan (2007-12) envisages a 125 per cent increase in budgetary support for ministries and departments.

Even the Prime Minister’s Economic Advisory Council, headed by C Rangarajan, and has called for increased public expenditure during 2008-09.

The total Budget support for the central Plan increased to Rs. 1, 54,939 crore (Budget estimate) during 2007-08, up from Rs 1, 26,510 crore (revised estimate) in 2006-07. The Planning Commission has projected that the central government’s budgetary support for central ministries will increase to Rs 1,096,860 crore during the 11th Plan, as compared to Rs 486,798 crore in the 10th Plan.

It has always been seen that infrastructure is a major indicator of the development of a nation and in the path of India’s development, the existing infrastructure needs to undergo a major revamp across the length and breadth of the country. Development of infrastructure is also an important election agenda and with general elections coming close it will be an important agenda for UPA.

Namit Agarwal