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'...that it once again shies away from renewing its commitment to strategic divestment,' points out A K Bhattacharya.
It would not be improper to say that a small proportion of India's population has become the limelight of the Union Budget for 2025-2026.
An income-tax relief amounting to Rs 1 trillion (about 2.5 per cent of the Centre's gross tax revenue) announced for about 43 million individual taxpayers, in a country with a population of over 1.4 billion, has become the central focus of the Budget. This is perhaps understandable, because such a big relief in one go is unprecedented.
Moreover, what Finance Minister Nirmala Sitharaman announced in her seventh consecutive full Budget on Saturday were not just reduced personal income-tax rates for different income slabs, but also a series of rationalisation and relief for the middle class, including easier norms for tax deduction at source to reduce the burden on the taxpayer.
This approach was premised on a diagnosis of the state of the Indian economy, which suggested that a demand boost through tax inducement could revive growth.
Only time will tell if the huge income-tax relief for that small proportion of Indian people would result in a consumption boost reviving demand and growth.
But this Budget is not just about income-tax relief. Equally important has been the way the finance minister has husbanded the Centre's resources in a year when headwinds from different quarters, domestic and international, had threatened to upset her numbers.
Consider the manner in which the fiscal deficit target for 2024-2025 has been over-achieved.
Its net revenue, according to the Revised Estimates (RE), fell by 1.3 per cent, compared to the Budget Estimates (BE).
Personal income-tax collections rose sharply, but a drop in corporation tax and non-tax receipts led to the shortfall. But this was made good by a 2 per cent cut in expenditure, largely driven by an 8 per cent fall in capital expenditure.
The quality of expenditure suffered after several years, but the fiscal deficit was reined in at 4.8 per cent of gross domestic product (GDP), compared to the BE of 4.9 per cent.
For the coming year, the Budget proposes a fiscal deficit target of 4.4 per cent of GDP, 10 basis points lower than the target she had promised in 2021.
You may quarrel about the assumption of a 10 per cent growth in corporation tax collection in 2025-2026, against a 7.5 per cent annual growth to be recorded in 2024-2025.
Remember that the assumption of higher corporation tax collections ride on the back of an assumed 10.1 per cent nominal growth rate. But the projection on personal income tax collections, expected to grow by 14 per cent over and above a 20 per cent rise seen in the current year, appears to be realistic.
On the expenditure side, the finance minister continues to maintain a tight leash, allowing only a 7.4 per cent increase to Rs 50 trillion in 2025-2026, comprising Rs 39 trillion of revenue spend (a rise of 6.6 per cent) and Rs 11.2 trillion (a scaled down growth rate of 10 per cent) on capital expenditure.
What's more, Ms Sitharaman presents the promised debt anchor for her fiscal consolidation programme for five years from 2026-2027.
Barring major shocks, the government would try to keep its fiscal deficit during these five years in a way that its debt is on a declining path to attain a level of 50 per cent of GDP (with a deviation range of one per cent either way) by March 31, 2031, compared to 57.1 per cent in the current year.
More clarity on the fiscal consolidation strategy for the road ahead will help. For instance, it would be important for the government to indicate whether it would also announce a specific fiscal deficit level or a range along with these debt figures.
This Budget is a lot about transparency as well. The Budget documents continue to make disclosures about the government's off-Budget borrowings (which were brought down to nil in 2023-2024 and are projected to be nil in the following two years also).
This is as big a relief as the additional disclosure on the liabilities of resources mobilised by select commercially-run undertakings of the Union government.
The outstanding liabilities of National Highways Authority of India and Indian Railways Finance Corporation show a declining trend, after they hit a high of Rs 3.48 trillion in 2021-2022 and Rs 4.78 trillion in 2022-2023, respectively.
Such disclosures also contribute to fiscal transparency and allow a better understanding of the state of public finances.
Yet another disclosure has been added in the Budget for 2025-2026. This statement shows the amount of total unspent funds available with the states and Union Territories, allocated to them under various centrally sponsored schemes (CSS).
As of December 31, 2024, an estimated Rs 1.6 trillion allocated for these schemes was lying with the states. This is not a small amount, accounting for over 40 per cent of the annual expenditure under CSS.
A disclosure on this helps the government arrive at a realistic estimate of accumulated balances and expenditure depending on the states' spending capacity, apart from enforcing accountability of spending by the states and explaining why underutilisation could have led to a lower allocation in the RE.
Needless to say, such disclosures increase awareness and even create fiscal space for more productive use of scarce resources, rather than allowing them to remain blocked as unused funds under certain schemes.
Perhaps, such a disclosure will also explain why the RE for the current year saw sharp reductions in the outlay for major schemes like urban housing, rural housing, rural roads, Swachh Bharat mission or the Jal Jeevan mission, compared to the BE.
Of the five promises Ms Sitharaman had made in her July 2024 Budget, she has delivered on four. The unified pension scheme would be rolled out from April 2025.
Customs rationalisation has been undertaken, resulting in a cut in the Customs duty on 26 items (including motorcycles), a lowering of the effective as well as tariff rates for 14 items, and a reduction in the tariff rates for 37 items.
A new income-tax regime is in place. A debt-anchored fiscal consolidation programme has been unveiled.
The only thing that remains to be outlined in detail are the contours of an economic policy framework to initiate fresh second-generation reforms in factor markets, even though there are many references in the Budget on reforms of power distribution, urban sector, regulatory architecture, mining, taxation and insurance, where the foreign investment cap was raised to 100 per cent.
And the regret about this Budget is that it once again shies away from renewing its commitment to strategic divestment.
It only talks about asset monetisation, whose proceeds, estimated at Rs 10 trillion over the next five years, would be ploughed back in new projects.
Hopefully, strategic divestment will come back on the government's agenda soon.
Disclaimer: These are A K Bhattacharya's personal views.
Feature Presentation: Rajesh Alva/Rediff.com
