Expenditure/GDP (%) :

The government is expected to extend Zero-based budgeting to all Central Plan schemes (there are 214 such centrally sponsored schemes). The proposal finalized by the Planning Commission and the Finance Ministry would ensure a sharp reduction in plan expenditure. The Budget allocation for Central ministries in the current fiscal accounts for Rs512. 75bn, or about 15% of the total government expenditure. The Tenth Plan beginning in '02 will thus begin on a clean slate with most of the schemes coming to an end, freeing additional resources for the states. Since a significant percentage of the staff of the ministries is also meant for the plan schemes, the review will also give a big boost to the downsizing effort. The new approach emanates out of the unsuccessful experience of the finance ministry, when it targeted only non-plan expenditure (NPE). NPE largely includes interest, subsidies, wages and pensions and defence expenditure. Out of the Budget support for the Central Plan, capex this fiscal was only Rs160bn while about 68.85% went towards meeting the establishment costs of the schemes including salaries of the staff.

Non-plan revenue expenditure - only subsidies have been under some check: Of the three key, non- plan revenue expenditure items, interest payments are proving to be the toughest to handle. While a major reason for this is the profligacy of the past, the high rate of interest and the increased recourse to domestic borrowings are only aggravating the matter. Mounting debt-service payments have raised the chances of India getting into a domestic debt- trap, since borrowings are being used increasingly to finance revenue deficits instead of being invested in new projects. Hence, for tackling this menace, a mere cap on the incremental borrowings would not suffice; adequate attention would have to be paid to marginal cost of funds in the system.

Defense outlay has suddenly become a scared cow post Pokhran and Kargil. The previous budget saw the largest ever hike in defense spending, blind to its impact on the deficit. Bearing this in mind and the continuing tenuous relations with Pakistan, the annual hike in defense outlay is unlikely to dip below 10% in the foreseeable future. As it is, the defense forces have been crying hoarse that the outlay is inadequate to carry out the much-needed upgradation of weaponry. In the light of this, the sole saving grace has been subsidies where some control has been exercised in the recent past due to more realistic pricing.

The expense of maintaining a bloated workforce too has tied down the hands of the government.

Share of subsidies in total government expenditure (%) :

While the collection on the direct taxes front is broadly in keeping with the estimates, on the indirect taxes front, customs duties have grown at a paltry 4% as against Budgetary estimates of a 12%.

Emerging problems in the last lap: The critical areas the Budget would need to address are, slowdown in industrial and agricultural growth and the dismal scene on the disinvestment front (the fifth time in the past six Budgets where the actual collection has been below 25% of the target set).

Agricultural Growth (%) :

Drought in many states is likely to lead to a decline in the agrarian sector (the second successive year). The government is bound to rue the poor management of surpluses during the kharif crop; if adequate steps had been taken to export the surplus, the colossal waste due to inadequate storage facilities could have been averted.