In this particular podcast, we will be talking about the difference in the Budgets as presented by the NDA government versus the ones by the UPA government.
(Note: This podcast was first published in January 2018 and has been repurposed for Moneycontrol listeners.)
Hello and welcome to Moneycontrol’s special pre-Budget podcast. I am Rakshita Madan.
Finance Minister Arun Jaitley is scheduled to present the Interim Budget on February 1, the last one ahead of the 2019 Lok Sabha elections.
In this podcast, we will talk about the difference in the Budgets presented by the NDA government versus the ones by the UPA government, in just under 5 minutes.
Joining me now is Moneycontrol’s Deputy Executive Editor, Gaurav Choudhury.
Q: Let's start by discussing the spending side. How has the Modi govt’s budgets been different with respect to spending pattern and sectors?
A: There are both similarities as well as divergences in spending patterns, particularly with focus to sectors. For instances, there is a big emphasis on the road and highway development. The annual budgetary allocation for the national highway authority of India has gone up from about Rs 27,000 crore in 2013-14 to about Rs 70,000 crore now.
Likewise, this government’s focus on providing access to electricity to rural households is well known. There have been new schemes such as the Sahaj Bijli Har Ghar Yojana, which has progressively seen more funds being allocated.
On NREGA, the UPA government’s flagship rural welfare scheme, the budgetary allocation has risen from about Rs 34,000 crore in 2013-14 to Rs 55,000 crore in 2018-19, although one would have expected the allocation to be much higher given the sweeping rural distress as well as depressed wage levels in villages.
Q: And Gaurav how about the revenues? This govt has introduced many tax reforms during its tenure
A: The size of the central budget itself has grown manifold in the last five years—from about Rs 16 lakh crore in 2013-14 to about Rs 25 lakh crore now, a jump of 56 percent—reflecting the growing size of the economy.
The economy has grown from about $1.6 trillion in 2013-14 to about $ 2.6 trillion now.
This is getting reflected in the government’s overall revenues as well. For instance, the Centre’s net tax revenues have risen from Rs 8.36 lakh crore to nearly Rs 15 lakh crore in 2018-19.
Taxes on income have grown from Rs 2.41 lakh crore in 2013-14 to Rs 5.2 lakh crore in 2018-19. This growth has got more rapid since 2016-17, after demonetisation and focus on cracking down on tax evaders.
Disinvestment revenues have been also gone up significantly from about Rs 27,000 crore in 2013-14 to more than Rs 1 lakh crore in 2017-18, although achieving the targetted Rs 80,000 crore disinvestment target this year looks challenging.
When the NDA government took over in 2014-15, the fiscal deficit was just shy of 5 percent of GDP. Finance minister Arun Jaitley has managed to bring it down below 3.5 percent, which is a commendable achievement.
Achieving the fiscal deficit target of 3.3 percent this year, however, looks challenging given that between April-November 2018, the fiscal deficit had hit 115 percent of the target.
Q: Gaurav the budget-making or announcing process has itself been tweaked by this govt. So what are those changes?
A: When finance minister Arun Jaitley stood up in the Lok Sabha in February last year to present the budget for 2018-19, it marked the beginning of a new course in India’s annual accounting process.
The roll out of Goods and Services Tax (GST) from July 1, 2017 has meant that the central finance minister has very little discretionary powers in changing a jumble of indirect levies.
India overhauled its tax system by consolidating an untidy patchwork of local and central duties such as VAT, central excise, special additional duties, cesses and service tax into a single GST.
The reforms in the budget making and public finance management actually started a year ago, from 2017-18.
By making the Railway Budget a part India’s main Budget, the government from 2017-18, the government signalled its intent to walk the talk on freeing the state-owned behemoth from having to deal with stressed finances and political populism.
From 2017-18, the government also agreed to advance the Budget’s presentation by a month, to allow tax and policy proposals to kick-in from April 1 itself.
It now enables completion of the budgetary process by April 1, the beginning of the financial year, besides giving companies and households time to finalise their savings, investment and tax plans.
The budget presentation’s advancement to February 1, has enabled process’ conclusion by March so that all spending and tax proposals can be implemented from the beginning of the new financial year.
The government has also done away with the “plan”, “non-plan” expenditure classification in the Budget. All government spending is now listed under ‘revenue’ or ‘capital expenditure’ as may be the case.
GST’s rollout has also meant that Part B of the Union Budget speech, now contains income and other direct taxes and customs duties, a major break from the past when every minor indirect tax change had market and sectoral implications.
Q: And lastly, Since this is a year of elections, I would like to bring up the issue of populist measures. Do you think there could be a difference on that front too?
A: Successive finance ministers have used the Interim Budget or Vote on Account to present a stirring report card of the government of the day’s record on economic management and reforms. I do not expect Mr Jaitley to be any different. Interim budget allow the government an occasion to talk about its achievements.
Conventionally, finance ministers have refrained from making any direct or income tax changes during an interim budget. Outgoing governments have avoided altering direct taxes .
Having said that, there is a talk of an Universal Basic Income (UBI) scheme that the Finance Minister might announce in the interim budget. As of now, that is still in the realm of speculation.
What one can be reasonably sure of is that the Interim Budget speech will likely have a distinct election undertone.Thank you for joining me Gaurav. And thanks a lot to all our listeners for tuning in. For more news, views and updates, stay logged on to Moneycontrol.com