Opinion: A Careless, Nothing Special, Not So Exciting Election Budget By Nirmala Sitharaman
Union interim Budget of Nirmala Sitharaman has announced nothing special or exciting as an election Budget. Even if it is a vote on account Budget, the confidence in the presentation is a term of further 5 years of return to power. Hence, least cared about any new promises; but was tried exalted the progress card of the last five plus five years with nullifying of all positivity before 2014 in India which in fact unprecedented.
The carelessness of the Budget start with the expected budgetary allocation itself. That is, if we look into the growth of any new Budget to that of the previous year Budget, the new Budget would have double digit growth. To make it clear, the Budget estimate of 2023-24 was 14.15% more than 2022-23. The same was true with a double digit in the previous Budgets. On the contrary, the current Budget (2024-25) is having a growth of just 5.8% compared to the Budget estimate of 2023-24. The reduction categorically made the point that the government don”t want to increase its size but expect more return in terms of income as part of its fiscal consolidation. That is even if having a 14% growth in revenue receipt the government is ready to spend only an additional allocation of 5.8%. The same figure is not even a match of revised income growth of 2023-24 and the Budget estimate of 2024-25.
If we analyse the income of the government from 2023-24 to 2024-25 Budget estimate, there are some major changes we can observe. The first change is, the composition of income tax has increased from 16% to 19%; the second is GST income has increased from 16% to 18%; and the third change is non tax receipt has increased from 5% to 7%. This increasing composition has a direct effect to the composition of falling customs and union excise duties from 11% to 9% and borrowings and other liabilities from 32% to 28%. As we noted elsewhere, the own account income of the government is increasing which has a positive effect on falling deficit. Though it seems to be very interesting, but at what cost the fall affects the expenditure, need to be analysed.
Two major intervention of government in terms of expenditure incurred are the centrally sponsored scheme and central sector scheme. In both the CSS combined, there is a fall of expenditure from 26% to 24% from 2023-24 to 2024-25 respectively. Similarly, there is a fall in finance commission stipulated transfers from 9% to 8% during the period. Interestingly both Centrally Sponsored Schemes and Finance Commission stipulated transfers are obligatory transfers or schemes which now the central government is deliberately scuttling. A fall in the subsidies from 7% to 6% during the period is definitely going to affect the primary sector of the country or the toiling masses. Such expenditure reduction in fact adversely affect the federal ethos and promises guaranteed by the constitution of India.
The interim Budget is used as a progress card of the last 10 years of achievement of Modi government. One of its important claims is a higher tax to GDP ratio.
Let us discuss the nitty gritty of the argument.
Based on the government finance statistics of IMF and World Bank, one of the highest tax to GDP ratio in the 20th century India was 10.5%, which is attained in 1989. However, in 21st century – specifically in 2007 the tax to GDP ratio of India was recorded as the highest that is 12.1%. This share has achieved from an abysmally low 8.1% share in 2001 and improved consistently. Despite the global meltdown lead recession, at the end of UPA 2, the tax to GDP ratio was again reached to 11% (2013-14). Interestingly the peak of tax to GDP ratio under Narendra Modi government is 11.6% which was recorded in the revised estimate of 2023-24. Otherwise, the actual of 11.5% in 2021-22 is the best. In a nutshell, these figures show that as per the record of the government, other than being consistent, the average tax to GDP ratio for the ten years period is less than 11%, which implies that there is still a lot to do to reach the best period of UPA1.
As expected, the most striking card of the first interim Budget of Nirmala Sitharaman again is the capital expenditure drive. Nonetheless, the is not as high as last year Budget. Despite the cut in all other major heads, this seems positive without doubt. In fact, the government is having a higher expectation in the front. Despite the fact of election or not, this Budget of the union government is clearly showing their lack of interest in the existing constitution and its promises especially the fullfilling of the federal economic values, which worries the most.
(Siddik Rabiyath is Director of Inter University Centre for Alternative Economics, and Assistant Professor at Department of Economics, University of Kerala)
