Column : Can we work from the revenue side?
Once we get into the FRBM framework, there is always pressure to perform and governments then walk the razor’s edge of balancing revenue with expenditure. Revenue generation is actually an extraneous concept because while the rates are fixed by the government, the assumptions made are on certain growth targets being realised. When they do not materialise, then problems start.
The main source of revenue is taxation. The ability to increase revenue depends on the taxable base increasing steadily, for if it does not, then the entire edifice stars cracking. Income tax, for example, showed an elasticity of 1.3 to growth in GDP in the last five years, meaning thereby that if our GDP in nominal terms grows by, say, 15% (sum of, say, 8.5% real GDP and 6.5% inflation), then income tax receipts could grow by 19.5%. Similarly, the elasticity of corporate tax collections is around 0.80 for the last 5 years while that of customs is 1.36 with respect to change in imports. Curiously, in FY09, when imports soared due to high imports of
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