CII has expressed hope that in the Union Budget 2015-16, the Finance Minister would keep a firm focus on fiscal prudence and stay the course on fiscal discipline.
Underscoring the significance of reining in the fiscal deficit, Mr Chandrajit Banerjee, Director General, CII eluded that “a restrained fiscal deficit would keep inflationary tendencies under check and facilitate ‘crowding in’ of private investment thereby strengthening the recovery process.”
In its suggestions for the budget, CII has requested the government to explore non-tax options of garnering revenue. Some such non-tax revenue options include hastening disinvestments, effecting dilution of residual government shares in private companies as well as going ahead with sale of spectrum and mineral blocks.
Another revenue generating measure is to flag-off strategic sale of loss making PSUs. Many of these units are in the non-strategic sectors where the presence of state serves little public purpose besides being a drain on the exchequer. Further, the Finance Minister would do well to start the process of monetising unutilized and underutilized government land available with railways, port trusts, etc and the money accrued could finance infrastructure development in the country.
Commenting on another important revenue augmenting option, which can also help bring in fresh capital for banks, Mr Banerjee said “the budget can look to pare the government stake in public sector banks to 51%. This would facilitate capital infusion and efficiency in public sector banks. In fact, we would go so far as to suggest that the government should consider bringing its stake below 51 percent in the future and still hold control.”
On the expenditure side, the Finance Minister could announce a roadmap to bring the subsidy burden down to 1.5 percent of GDP from the current level of 2.3% over the next two years. The amount saved could be diverted towards incurring the much needed capital expenditure.
In its pre budget recommendation, CII has said that the Budget should follow strict budgeting to ensure that the amount allocated in the Budget is not exceeded. The prices of subsidised items should be raised if the target is exceeded. This model of curbing runaway subsidy bill could also be emulated by the states. The implementation of Aadhar in a time bound manner would be the best possible antidote to plug leakages and ensure that the potential of direct benefit transfer is fully utilized. The government should also desist from announcing new schemes especially where fund allocation could be a challenge.
CII has also suggested that all pending bills should be cleared in the year when they are due. According to the recommendations made, CII has suggested that India should actually explore the option of shifting to an accrual based budgeting from the cash-based one at present. This would bring transparency in the accounting system while ensuring better outcome from the same amount of money spent. Quite a few countries such as Australia, New Zealand, UK etc have shifted to accrual based budgeting to get a better outcome from the budget spending.