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The government will amend the Fiscal Responsibilty and Budget Management Act (FRBM), keeping in mind the new fiscal framework and fiscal deficit targets as proposed by the 15th Finance Commission. For FY20-21, the government has reworked the deficit target to 9.5 per cent of GDP and 6.8 per cent of GDP for the next fiscal,.
The Finance Ministry has said that it has given ‘in-principal’ approval to the recommendation given by the Commission for borrowing by the States. The Commission recommended that the proposed normal limit for net borrowings of State governments be fixed at 4 per cent of GSDP in 2021-22, 3.5 per cent in 2022- 23 and maintained at 3 per cent of GSDP from 2023-24 to 2025-26. The Commission has also recommended an extra annual borrowing space for the States, of 0.50 per cent of their GSDP for 2021-22 to 2024-25, based on performance criteria in the power sector.
“We have given a clear glide path,” Finance Minister Nirmala Sitharaman said, while talking about fiscal expansion in the budget. For the next fiscal, the Budget has pegged total expenditure of over ₹34.83 lakh crore as against budget estimate for FY20-21 at ₹30.42-lakh crore and revised estimate of ₹ 34.50-lakh crore.
The net tax revenue for the new fiscal has been estimated at ₹15.45-lakh crore; this is lower than ₹16.35-lakh crore of budget estimate for the current fiscal, but higher than the revised estimate of over ₹13.44-lakh crore. This shows a net tax shortfall of e around ₹2.9-lakh crore during current fiscal.
Fiscal deficit ‘ignored’
According to Anil K Sood, Professor and Co-Founder of IASCC (The Institute for Advanced Studies in Complex Choices), it is true that the government has wisely ignored the concern about fiscal deficit; it is not clear if the Budget is actually going to aid nascent recovery and put us on a path of growth that will help take the country back to a 6-7 per cent level on a sustainable basis. “We have to remember that our growth rate had already fallen below 5 per cent during the pre-pandemic period itself,” he said.
While the capital expenditure is budgeted to increase by 26.2 per cent, the revenue expenditure is expected to decline slightly. Interest payment is estimated to go up by 16.9 per cent during the next year. “The total expenditure is expected to go up only by 0.95 per cent, far less than expected inflation rate. In real terms, the government support to the struggling economy is shrinking,” he said.
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