Search the Internet          Tips  Sites: Finance, Investment

Government must rework Budget estimates

Subhomoy Bhattacharjee & Santosh Tiwary

The government will have to rework the entire set of budget estimates for the current fiscal with the Centre facing an uphill task of mobilising Rs 530 billion more on its non-debt revenue receipts account which is an unprecedented hike of about 25 per cent. The government's actual non-debt revenue receipts for the last fiscal stood at Rs 2052.41 billion.

The problem occurred because the revenue department had not scaled down either tax or non-tax revenue estimates while preparing the RE for the last fiscal.

Instead, both were raised from the BE. But according to actual figures, the total revenue shortfall has been to the tune of Rs 105 billion with the actual gross tax revenue touching Rs 1820 billion against the RE of Rs 1925.21 billion. Non-tax revenue for the last fiscal stood at Rs 557.95 billion (RE: Rs 617.63 billion). In the last fiscal, the government raised its non-debt receipts over that of 1999-2000 by only about Rs 104 billion, which represents a mere 5 per cent increase.

Non-debt receipts of the government include tax and non-tax revenue, loan recovery and divestment proceeds. The non-tax revenue includes interest receipts, dividends from PSUs and others. The difference between the non-debt receipts and total expenditure constitutes the fiscal deficit of the government.

The lowering of the base of calculations will have more than just cosmetic impact on the government finances. The implications include a mismatch in several disbursements by the Centre including the central plan assistance to state governments, which have already begun based on the incorrect budget estimates.

The differences have also called into question the reliability of the Budget figures, which now seem heavily sugar-coated. The mismatch will also have an impact on the borrowing programme of the Centre over this fiscal.

As per the budget estimates now, the Centre will have to mobilise an hugely ambitious growth in gross tax realisation of 24 per cent this year to reach Rs 2204.49 billion, about Rs 380 billion more than last year.

The best trend rate of growth in taxes that has been achieved over the years is 14 per cent. Besides, India has been unable to raise its tax-GDP ratio from 8.6 per cent, which is 50 per cent lower than even Pakistan. Unless the Centre revises its budget estimates sharply the finance ministry can face a difficult year ahead, trying to reconcile an almost impossible set of targets with the actual realisations on the revenue side.

Similarly, the non-tax revenue comprising interest receipts, dividends of PSUs including the RBI and other receipts are estimated to scale up to Rs 687.14 billion.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report