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BUDGET FOR GROWTH OR BUDGET OF LIES?

Budget, an annual statement of revenue and expenditure, is not just a piece of paper, it is the future of the country, of about 1.3 billion people and their livelihoods. When the Budget of 2020 was announced in February last year, the country had witnessed 7 consecutive quarterly slowdowns and was ready to slide into the other one, for the last quarter of 2019-20. A month later when the pandemic entered the country, the slowdown converted into a recession. While we talk of a contraction or slowdown in GDP, it is not only that some numbers have fallen, it is the fact that there were actual people who lost their livelihoods, people who weren’t able to make their ends meet, people who had to drop out of education because their family couldn’t afford it anymore. Again, the purpose of this conversation is not to exaggerate a contraction, it is to humanise those numbers in the budget that actually have the potential to affect people’s lives. That being said, the most basic thing a country can expect from its government is to be transparent about those numbers. However, looking at the track record, it seems like it is too much to ask for.

Any individual looking forward to the budget basically takes note of three thing- The receipts, the expenditure and the borrowings. These three forms the most fundamental parameters in deciding the next economic state of the country’s fiscal year. However, if these numbers are rigged or portray a different picture than what the reality would be, the budget is nothing but a waste of papers. The numbers as presented in the budget 2020 were far different from what the country actually experienced. Well, let’s just give the government the benefit of the doubt and blame it all on the pandemic. However, what do we blame it on this year, because as you’ll uncover in the coming sections, the Finance minister has gone far and beyond with optimism and hopes, leaving behind nothing but false expectations for the people.  Focussing on the fundamentals- revenue, expenditure and borrowing, let’s understand how.

As mentioned in the budget, the government has listed two major sources of revenue in the coming year- tax revenue and money generated from disinvestment. Now, the finance minister in the budget of 2021 has very eerily assumed that the net tax revenue for the coming fiscal year would increase by a whopping 14.9%. Well, even if we overtake the government’s optimism and assume that the recession would end in the coming quarter, the chances of the GDP to grow sufficiently large to yield a tax revenue of 14.9% are abysmally small, especially considering that the total decrease in the tax revenue last year due to the pandemic and recession was only 1%. The reason for this optimism is, however, being questioned by economists. The receipts from disinvestment from the last fiscal year fell short by Rs 1,78,000 crore and despite that, the coming budget estimates Rs 1,75,000 crore in the coming year, the sources for whom are not yet made available. If news is to be trusted, the government’s plan to sell 4 midsized banks, 2 of whom are said to be sold next year, would also not meet the said target especially considering the loss public sector units underwent due to the recession. In conclusion, it can be said that the government has definitely over-estimated the revenues.

Now, let’s talk about expenditure. Unlike common practice, the government in the budget of this year included the off-budget borrowings, which are not accounted for during budget calculation normally. Now, even though this move for transparency is appreciated, there are questions being raised on the inclusion of the re-payment of this off budget borrowing, the Rs 2,65,095 crore payment to the Food Corporation of India (FCI), in the budgetary expenditure. By definition, government expenditure or budgetary expenditure is the money being spent by the government to stimulate the economy. This re-payment of off-budget borrowing doesn’t add any value to the economy and thus, its inclusion is misleading at best. Not just that, it doesn’t take a genius to realise that the budgetary expenditure in health, education and employment sector needed to be increased by a substantial amount, considering the hit they suffered during the pandemic. But, on the contrary, the government has reduced the share for education and health, and the increase in others is meagre. All in all, it is safe to say that the government has severely under-estimated the expenditure.

Now that we have established the under estimation of expenditure and over estimation of the revenue, it is not too far-fetched to say the borrowing estimate of Rs 15,06,812 crore is grossly misleading. If the government doesn’t acknowledge the problem, it sure won’t solve the problem and looking at the current numbers, the problem is going to be huge. So, are we going to sit around and wait till it knocks our door?

Not to mention, The FRBM act hasn’t even been remotely talked about in the budget. Now, it can’t be denied that the economy is in dire need of fiscal expenditure and the FRBM act’s target can’t be prioritised in the short run, but it is the responsibility of a well-functioning government to establish long term provisions simultaneously to save from damages in the future. Well, looks like we’re neither well-functioning nor responsible. The government did describe the path of fiscal deficit to reach 4.5% by the year 2025-26 from the coming year’s estimated 6.8%. FRBM act, where you at? Oh, and the act also aims at giving functional independence to the central bank to control inflation, which the government voraciously claimed to be estimated at 3%, contrary to RBI’s and other economists’ estimate of 4.6%. Again, no acknowledgement means no solutions.

It is understandable that the budget consists of estimates, assumptions and they can go wrong, undoubtedly. But aware attempts at manipulating the figures and misrepresenting situations is not only deceitful, it is harmful for any developing country. After all, it’s the common people who are left at the suffering end of the story. 

 

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