No decisive step to arrest the economic decline in Union Budget 2019
Tucked away in the statistical appendix of Volume 2 of the Economic Survey, presented in the Parliament on July 4, is a table which provides actual estimates of revenues and expenditure of the government in 2018-19.
The numbers reveal that the revised estimates of revenues and expenditure presented by the Finance Minister in the interim Budget in February were grossly over-estimated — the actual revenue receipts and total expenditure of the government fell short of the estimates by Rs 1.67 trillion (0.9 per cent of GDP) and Rs 1.46 trillion (0.8 per cent of GDP), respectively. This is a serious matter because the interim budget estimates were presented just ahead of the parliamentary elections.
Even more surprising is the fact that despite the actual estimates now being available to the government through the Controller General of Accounts, the new FM has chosen to reiterate the same erroneous revised estimates for 2018-19 in the budget documents presented in Parliament on July 5. The only conceivable reason for this is that she wants to conceal the fact that the Centre’s net tax revenue growth has fallen sharply from 12.8 per cent in 2017-18 to around 6 per cent in 2018-19, a clear sign of an economic slowdown.
In fact, the slowdown, in reality, appears to be much sharper than the 0.4 per cent fall in annual GDP growth suggested by the official estimates — which have been widely criticised for artificially inflating economic growth rate. The cut in revenue expenditure by Rs 1.3 trillion and capital expenditure by Rs 13,664 crore have also been concealed.
One does not know on which heads the axe has fallen. The fiscal deficit figure of 3.4 per cent of GDP for 2018-19 is also not credible since Rs 97,000 crore worth of National Small Savings Fund loans to the Food Corporation of India have been categorised as capital expenditure under revised estimates for 2018-19 —an accounting trick to conceal government borrowing.
By persisting with such concealment of actual numbers, the new FM has begun her innings on a non-transparent note. Her budget estimates for revenues, expenditure and the fiscal deficit would, therefore, suffer from a credibility deficit from the very first year of her office. The Economic Survey has already indicated a slowdown in investment and a widening of the trade deficit.
The first budget of the Modi 2.0 government hardly contains any decisive step to arrest the economic decline and boost consumption, investment and exports. Setting up a credit guarantee corporation and partially guaranteeing credit worth Rs 1 lakh crore to NBFCs, amounts to little and would also make the government underwrite private sector risks. Why can’t the government make direct public investments in infrastructure? The source of the credit crisis in the Indian economy lies in the humongous stock of Non-performing assets (NPAs) accumulated by the banking system, thanks to large-scale corporate delinquency.
While waxing eloquent about the reduction and recovery of NPAs in the recent period, the FM once again concealed the fact that banks have simply written off NPAs worth over Rs 4 trillion. Taken together, public sector banks have made aggregate losses of over Rs 66,000 crore in 2018-19, mainly because of these NPA write-offs. With the weakening public sector banks’ financials, credit flow continues to remain subdued.
In the absence of a coherent strategy to tackle the economic slowdown, the targets of becoming a $5 trillion economy and making infrastructure investments worth Rs 100 trillion set in the budget speech sound more like slogan shouting.
The Indian economy deserves much better.
(Courtesy of Mail Today)