The Hindu Business Line : Fiscal deficit under control: Narayan

WITH key economic indicators including industrial production showing an upturn, the Finance Ministry is optimistic of reining in fiscal deficit at the budgeted level of 5.3 per cent of the gross domestic product (GDP) during the current fiscal.

"Going by the trends so far, the fiscal deficit is under control. We are closely watching the situation and a clearer picture would emerge after December 15 when corporates pay up their third instalment of advance tax," the Finance Secretary, Dr S. Narayan, said here on the sidelines of an interactive session on `Indian textile industry - Challenges beyond MFA' organised by the Federation of Indian Chambers of Commerce and Industry.

Only last week, the Centre put off its scheduled market borrowings of Rs 5,000 crore through auctions during November 18-23 citing comfortable liquidity position.

Although an internal stock taking of the revenue trends has pointed to a possible slippage in overall tax revenues and divestment receipts, the Finance Ministry is banking on a major compression in expenditure to bridge the revenue shortfall.

Dr Narayan said that a review of the trends in expenditure was currently on. The exercise is likely to be completed by the end of December, based on which the Ministry would firm up the revised estimates for 2002-03.

On the demands of textile industry for rationalisation of excise duty across the entire textile value chain at a uniform rate, Dr Narayan pointed out that rationalisation of excise duty is only an activity towards the larger end of strengthening the sector for the coming years.

"Mere rationalisation of excise duties is not going to solve the problems. You will have to take a decision on where in the value chain you would like to be positioned. A distinctive competitive edge for India will have to be developed, particularly when the textile sector is looking at huge increase in exports to sustain growth in the next decade.

We will also have to take a decision this year about the future of small and marginal sections of the industry," Dr Narayan said

The "largely fragmented" nature of the textile industry was posing a problem for the excise administrators. "We will have to evolve a methodology and work out a mechanism through which the small players can get into the Cenvat chain. This should not be intrusive and it should not add to their woes," Dr Narayan said.

This view of the Finance Secretary came in response to the demands of the organised players in the textile industry that the full Cenvat chain should be completed. The FICCI Task Force on Textiles has recommended that the customs duty on key raw materials like purified terephthalic acid and mono-ethylene glycol be reduced to 10 per cent. A demand for reduction in customs duty on wood pulp used in the manufacture of viscose staple fibre to zero has also been made.

A case was also made before the Finance Secretary for the abolition of deemed credit facility as this benefit was being misused by the unorganised sector.

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