CURSOR

Fiscal consolidation gets the stimulus, FM delivers the goods

TK Arun, 27 February 2010, 03:23 PM IST

THE finance minister has delivered the single-most significant expectation from the budget: fiscal consolidation. With this, India joins a select band of countries that have begun to exit the extraordinary stimulus governments unleashed to combat the global crisis. While partially reversing the tax giveaways, the government has unified the rates of tax on goods and on services, and expanded the scope of service tax a bit, achieving tax reform in the process and facilitating the proposed move to a goods and services tax (GST) next fiscal. The FM proposes to bring the fiscal deficit down to 5.5% of GDP in 2010-11 and further down to 4.8% and 4.1% of GDP over the two subsequent years, and commits to follow the Finance Commission prescription to bring public debt down to 68% by 2014-15. He also proposes sharp cuts in non-Plan expenditure and rise in Plan spending. Such earnest display of commitment to quantitative and qualitative fiscal responsibility is bound to impress foreign investors. Rise in excise duties and petrol and diesel prices will upset consumers across the board, but the FM has bought peace with the vocal middle class by giving them unexpected income-tax concessions. Moving to macro-economic balance and moving to tax and petro-price reforms are welcome; omission of other big reforms is a worry.