New Delhi, Feb. 25: The Centre’s subsidy bill would go down by half-to-one-per-cent of the gross domestic product (GDP) by 2019-20, if the government follows the road map drawn out by the Finance Commission.
“We believe it is possible to have a greater rationalisation of the subsidy expenditure… from the present level of 2 per cent of GDP in 2014-15 (BE),” the Finance Commission said while laying out the subsidy road map.
The commission said it had accepted the subsidy rationalisation plan of the finance ministry to prune it to 1.7 per cent of GDP in 2015-16 and 1.6 per cent in 2016-17.
Based on these projections, the commission said it expected the subsidy to come down to 1.4 per cent in 2017-18, 1.2 per cent in 2018-19 and 1 per cent in 2019-20.
The panel has projected the subsidy bill to come down to Rs 2,42,539 crore in 2019-20 from Rs 2,60,658 crore in 2014-15.
“The fiscal space expected to be created in 2015-16 because of lower fuel subsidy outgo after deregulation and higher excise collections would help to offset the likely increase in taxes to be passed on to the state governments based on the recommendations of the Finance Commission and higher expenditure towards food subsidy after the all-India rollout of the National Food Security Act,” rating agency Icra said in a note.
In its memorandum to the commission, the finance ministry had expressed concern that the food subsidy would increase with the implementation of the food security act and other issues such as the minimum support price and economic costs of procuring and distributing foodgrains.
According to the commission’s data, the food subsidy bill is expect to go up to Rs 162,501 crore in 2019-20 from Rs 115,000 crore in 2014-15.
Till last year, 11 states have adopted the food security act, while others are likely to follow.
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