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It is inescapable from the arithmetic that revenue expenditures and tax revenues are in need of serious corrections
Finance Minister Nirmala Sitharaman began a new practice in the Union Budget, presented on July 5, when she relegated the numbers, or the budgeting, to the fine print, in a break with tradition; they are usually presented as a part of the speech on the floor of the House in Parliament.
What are the compulsions that could have made her shy away from stating the numbers as her predecessors have done earlier, no matter how uncomfortable the fiscal position?
The Central government’s tax revenues for the financial year ending March-end 2019 — as reported by the Controller General of Accounts (CGA) — fell short of the Interim Budget’s estimates (that the Modi government presented in its first tenure) in February by a whopping 0.9% of GDP. The CGA’s figures show that direct tax collections for 2018-19 fell short by Rs. 74,774 crore while those of indirect tax collections were by Rs. 93,198 crore. The Budget Speech saved the Modi government the embarrassment of owning up to this shortfall on the floor of the House, although this is not the first time that a government has overestimated tax collections. The Budget now estimates Rs. 1,05,000 crore to be raised through disinvestment, higher than the Rs. 90,000 crore that Mr. Goyal had projected in the Interim Budget and the Rs. 80,000 crore raised in 2018-19.
Tapping public enterprises
On the revenue side, therefore, the government proposes to make up for its below-expectations performance by extracting more from profitable public sector enterprises (PSEs); the economy would have been better off had these enterprises taken the lead in rolling out fresh investments, thereby generating growth impulses for the rest of the economy. As a percentage of GDP, non-tax revenue is budgeted to grow from 1.3% in 2018-19 to 1.5% in 2019-20. The government’s interest payments for past borrowings, the largest component of the revenue expenditure, are budgeted to grow in nominal terms, from 11.1% in 2018-19 to 12.4% in 2019-20, or faster than even the estimated GDP growth. Capital expenditure of the government is budgeted at Rs. 3,38,569 crore for 2019-20 which reflects a growth of 6.9% over the revised estimate of 2018-19. In other words, capital expenditure is projected to grow at a rate slower than the projected rate of GDP growth. This comes when the Budget speech made much about the need to revive investments to accelerate GDP growth. Ms. Sitharaman emphasised in her speech that investments of Rs. 100 lakh crore would be needed cumulatively over the next five years to boost infrastructure; this works out to be around Rs. 20 lakh crore a year. She did not say where this money would come from. Current savings and investment rates in the economy cannot provide for such large sums. Perhaps the hope is that foreign investors will deploy in India cheap funds they will be able to raise in advanced economies where the costs of borrowings are expected to reduce as the global economy enters a phase of weak economic growth and trade. Be that as it may, what is not clear is how the government expects the Budget to be called ‘pro-investments’. It is inescapable from the Budget arithmetic, though, that revenue expenditures and the tax revenues are in need of serious corrections. If they were in better shape, significant expansions in public investments would have been possible.
Source : https://www.thehindu.com/todays-paper/tp-opinion/a-hand-to-mouth-budget/article28460457.ece
