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Budget 2017-2018 presented on February 1, 2017, by the finance minister enmeshed the Railway Budget with it for the first time since 1924.
My first observation: In the 2016-2017 Budget, the estimate of the expenditure of the Union was ₹19.78 lakh crore and that of the Railways was ₹1.71 lakh crore, totalling ₹21.49 lakh crore.
In 2017-2018, total expenditure has been budgeted at ₹21.46 lakh crore. Does this mean this year the budgeted expenditure has gone down? It is obvious that the Railways statements have been shown separately and have not been taken into account to compute fiscal deficit. The table shows an analysis of the major heads of expenditure of Budget estimates for 2016-2017 and 2017-2018.
Non-Plan expenditure It would be observed that all the non-Plan expenditure has increased substantially this year. Expenditure on account of police, which was budgeted at ₹59,000 crore last year, could not have been reduced this year.
Also, a combined budgetary allocation of miscellaneous services, general services, economic services and social services which was ₹1.37 lakh crore last year, also could not have been reduced this year. So, the total non-Plan expenditure of ₹14.28 lakh crore of last year would have surely increased this year.
Unfortunately, this year these figures of non-Plan expenditure remain unclear due to the new system being followed.
To state clearly, the estimated receipts and expenditure of the Government in respect of the ensuing financial year is the Constitutional mandate under Article 112. The Constitution only mandates that expenditure on the revenue account ought to be distinguished from other expenditure. This mandate surely does not obviate the need to clearly state all the other expenditure at a glance for the benefit of the legislature so as to have a healthy debate in Parliament.
Not everyone can digest the voluminous documents of the Budget running into several hundreds of pages, filled with endless numbers and figures.
Whilst the decision to introduce a simple, one-page income tax return is laudable, it is time to switch back to the system of Plan and non-Plan expenditure in Budget documents in addition to capital and revenue expenditure.
It is clear that the fiscal situation is less comfortable than the Budget figures tend to indicate. Firstly, non-Plan expenditure has increased by leaps and bounds. Secondly, allocation for growth to different ministries cannot possibly be curtailed this year. So, the expenditure figure of ₹21.46 lakh crore is highly optimistic. Besides, non-tax receipts have been budgeted to be slashed hugely from ₹3.22 lakh crore to ₹2.88 lakh crore this year.
Growth rate of 27.5 per cent of the central excise budgeted figure from ₹3.19 lakh crore to ₹4.07 lakh crores is highly optimistic amid the slowdown in the economy.
Growth rate of direct tax at 15.7 per cent from ₹8.46 lakh crore to ₹9.79 lakh crore has been projected primarily because of personal income growth of 24.9 per cent from ₹3.53 lakh crore to ₹4.41 lakh crore. Corporate tax growth rate has been budgeted to increase only by 9.12 per cent from ₹4.93 lakh crore to ₹5.38 lakh crore.
This shows that the finance minister is banking more on individuals rather than on corporates to raise direct tax revenue. This trend is inequitable.
Also, it is to be noted that the ratio between direct tax collection and indirect tax has now fallen to 1.05 : 1 (₹9.79 lakh crore direct taxes and ₹9.27 lakh crore indirect taxes). This ratio last year was projected at 1.08 : 1 (₹8.46 lakh crore direct taxes to ₹7.80 lakh crore indirect taxes). This is not a healthy trend.
This reflects that the Government has been steadily failing to collect direct taxes optimally. One amnesty scheme after another has vitiated the direct tax collecting machinery.
Even the fiscal deficit figure estimated at 3.2 per cent of GDP is unrealistic.
Budget estimates of GDP for 2017-2018 is ₹1.68 crore crore from ₹1.50 crore crore last year, reflecting a GDP growth of 12 per cent. It is on this inflated base of GDP that fiscal deficit of ₹5.46 lakh crore has been projected at 3.2 per cent of GDP. A more accurate estimation of GDP growth rate would increase the fiscal deficit.
What’s disturbing Overall, it is not clear at all from the document, Budget at a Glance 2016-2017 , released by the Ministry of Finance as to how enmeshing the Railway Budget and discontinuing Plan and non-Plan expenditure would facilitate optimal allocation of resources.
Another disturbing aspect is the ever-swelling debt situation. The outstanding debt and other liabilities of the Government at the end of 2017-2018 have been estimated at ₹77.21 lakh crore as against ₹72.15 lakh crore at the end of 2016-2017 (revised estimates).
The economy is thus submerged under a huge debt; the cost of debt servicing has been swelling (interest payment ₹5.23 lakh crore); it is time, therefore, for Parliament to limit borrowing by the Union Government through Article 292 of the Constitution. The fiscal situation is far from rosy.
The writer is a senior advocate in the Supreme Court . Via The Billion Press
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