28 July, 2014 15:49 IST
News
Govt may target lower subsidy of 2.3% of GDP in FY14: Morgan Stanley
Source: IRIS (22-FEB-13)
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The bigger contributor to reduction in projected deficit will be a cut in the ratio of government expenditure to GDP.
   
"Subsidy allocation accounts for another 15-16% of total expenditure. It provides scope for reduction, yet we believe that the non-interest non-subsidy component (which accounts for 62-65% of total expenditure) is where the government can reduce its spending growth," said Morgan Stanley.
 
Total subsidy spending provided in the budget has risen steadily from 1.3% of GDP in F2006 to 2.5% in F2013. "If we include the off-budget burden, then the total has increased from 1.5% in F2006 to 2.8% in F2013 (though off the peak of 3.9% in F2009)," it said.

''We believe that given the recent announcements on fuel price deregulation and potential announcement of a new food subsidy program, the government would target a lower subsidy allocation of 2.3% of GDP in F2014, vs. our estimate of 2.8% of GDP in F2013,'' it added.

It further believes that higher spending growth will most likely take place in the second half of the fiscal year assuming the trend in tax revenue growth is supportive.

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