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Budget 2015: Government likely to cap subsidy burden at 1 pc of GDP, says EY.


Date: 04-02-2015
Subject: Budget 2015: Government likely to cap subsidy burden at 1 pc of GDP, says EY
NEW DELHI: Government is likely to cap subsidy burden at about 1 per cent of gross domestic product in FY16 while restricting fiscal deficit at 3.6 per cent, global consultancy firm EY said today.

Fall in global crude oil prices to about USD 45 per barrel presently from as USD 108 a barrel in June 2014 will help the government cut the subsidy burden substantially, it said.

"Subsidies are likely to be reduced significantly in FY16 Budget, possibly contained well within 1 per cent of GDP."

"This has to be a blessing for a heavily crude import dependent economy like India. Apart from an improvement in balance of trade, as domestic petroleum prices fall, more disposable incomes in the hands of domestic consumers can be allocated for other consumption goods and saving," the company said during a presentation here on budget 2015-16.

Finance Minister Arun Jaitley will present the eight month old NDA government's first full budget on February 28.

On the deficit front, it expects the government to maintain fiscal consolidation as announced in the last budget.

"Government likely to continue with the fiscal consolidation path by continuing to compress expenditures and taking advantage of revenue and expenditure seasonality."

There is very little room on the revenue side for substantial stimulus, government is stuck to make meet the fiscal deficit target, but there is substantial room for non revenue budgetary as well as non budgetary items, it said.

"Very substantial progress has been made to simplify the process of ease of doing business," said Satya Poddar, Partner, Tax & Regulatory Services, EY.

For current fiscal ending March 31, the government may be able to meet the fiscal deficit target of 4.1 per cent of GDP.

However, the quality remains poor as about 76 per cent of the fiscal deficit up to December 2014 is accounted for by revenue deficit, it said.

Among others, the consultancy firm expects no change in the corporate tax rates in upcoming budget, removal of minimum alternate tax (MAT) on SEZs for exemption period and grant of exemption from long term capital gains tax to sponsors of REITs (Real Estate Investment Trust).

Source : economictimes.indiatimes.com

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