Tuesday, February 28 2006 15:01 Hrs (IST) - World Time -

New Delhi: The government today (Feb 28 2006) proposed to raise social and infrastructure spending significantly but not at the cost of fiscal discipline, as Finance Minister P Chidambaram pledged to cut deficit from 4.3 to 3.8 per cent of GDP during 2006-07.

Presenting his Budget in Parliament, Chidambaram said "revenue deficit is estimated at Rs 84,727 crore which is 2.1 per cent of GDP. Fiscal deficit is estimated at Rs 1,48,686 crore, which is 3.8 per cent of GDP."

Revenue deficit was pegged at 2.7 per cent in last year's budget while fiscal deficit was targeted at 4.3 per cent. Government later revised the revenue deficit estimate to 2.6 per cent and fiscal deficit to 4.1 per cent.

The drastic cut in deficits, which is on the lines of Fiscal Responsibility and Budget Management Act, has been proposed despite substantial increase in expenditure for social and infrastructure sectors and with moderate tax rates.

Customs and excise rates have been slashed for a number of items, while there has been a raise in Service Tax and Securities Transaction Tax.

Total receipts and expenditures have been pegged at Rs 5,63,991 crore each for 2006-07.

Revenue receipts are slated to rise by 15 per cent to Rs 4,03,465 crore this year from Rs 3,51,200 crore budgeted for last year.

Tax revenue is targeted at Rs 3,27,205 crore, a 20 per cent jump from last year's budget estimate of Rs 2,73,466 crore. The revised estimate for tax collection is at Rs 2,74,139 crore for 2005-06.

Government aims to lower its borrowing

Among the capital receipts, government aims to lower its borrowing and other liabilities to Rs 1,48,686 crore to finance the fiscal deficit in 2006-07, which is lower than the Rs 1,51,144 crore budgeted for 2005-06.

However, market borrowing is slated to go up to Rs 1,13,778 crore next fiscal from Rs 1,03,836 crore budgeted for 2005-06.

On the spending side, non-plan expenditures are pegged at Rs 3,91,263 crore for 2006-07 compared to Rs 3,70,847 crore of 2005-06. The revised estimate of non-plan spending is at Rs 3,64,914 crore for this fiscal.

Of the non-plan spending, interest outgo will amount to 1,39,823 crore for next fiscal compared to the budgeted estimate of Rs 1,33,945 crore and revised estimate of Rs 1,30,032 crore for this fiscal.

Plan expenditure are significantly hiked to Rs 1,72,728 crore for next fiscal from the budget estimate of Rs 1,43,497 crore and revised estimate of Rs 1,43,791 crore for 2005-06.

The primary deficit, which is worked out by negating the interest outgo from the fiscal deficit, has been pegged at Rs 8,863 crore for next fiscal or 0.2 per cent of GDP compared to Rs 17,199 crore budgeted for 2006-07.