Wednesday, February 16 2005 15:59 Hrs (IST) - World Time -

New Delhi: The Budget for 2005-06 may peg gross budgetary support (GBS) at Rs 1,72,000 crore, which includes about Rs 26,000 crore additional outgo from the Centre to the States in line with 12th Finance Commission's recommendations.

If one excludes the amount that has been earmarked for implementing finance panel's suggestions, the GBS is close to last year's level of Rs 1,45,000 crore.

Planning Commission's advocacy of a higher GBS of Rs 1,96,000 crore notwithstanding, the Finance Ministry is in favour of keeping the figure at Rs 1,72,000 crore, official sources said in New Delhi today (Feb 16, 2005). The Finance Ministry has conveyed to the Planning Commission that GBS could not be stepped up to Rs 1,96,000 crore as it could lead to a higher fiscal deficit in 2005-06, the sources said.

As per the Fiscal Responsibility and Budget Management Act (FRBM), the Centre has to cut fiscal deficit by at least 0.3 per cent of GDP annually. This means that the fiscal deficit for 2005-06 has to be budgeted at 4.1 per cent compared to 4.4 per cent for 2004-05.

Finance Minister P Chidambaram is likely to justify the modest hike in GBS to Rs 1,72,000 crore on the background of a low tax base, rising expenditure for social schemes and implementation of the 12th Finance Commission recommendation on hiking the State's share of central taxes, debt relief and grants to States.

By raising GBS by over 18 per cent, the Finance Minister would be able to appease the Congress and Left parties, which have stressed on an additional allocation of Rs 40,000 crore for agriculture, rural infrastructure, education and health, and yet abide by the FRBM Act.