The drama in yesterday?s interim budget was provided by honourable members of the Opposition; the finance minister made a speech largely on the lines that would be expected of a government whose electoral mandate is set to shortly expire. It is only proper that departures in the form of changes in tax rates, new items of expenditure and for that matter any major change be held over for the next Parliament to hear, debate and approve.

Sans tax proposals and big changes in expenditure, the Union Budget turns rather bland, but considering that we will have a full-fledged budget later this year, it is not such a deprivation. But this budget has some very interesting features and it has much to do with the way in which the finance minister could lead up to his fiscal and revenue deficit numbers being lower than that in the budget estimate (BE). While much of the attention has been engaged on the revenue front, making the easy connection with strong economic growth and tax collections, the real change has been on the expenditure side.

But first the revenue side: Revised estimates (RE) for 2003-04 show that tax receipts of the Centre will be Rs 3,370 crore more than the BE. We know that for the 9-month period April-December 2003-04, tax receipts of the Centre rose by 14 per cent. In order for the RE to materialise, tax receipts in the remaining three months, ie, January-March quarter must increase by 26 per cent compared to the same period of last year. Not impossible, but unlikely: more likely is that tax receipts will be some Rs 7,000 crore less than the RE.

The interim budget also expects non-tax revenues to be Rs 5,722 crore higher than the BE, despite a reduction of Rs 3,161 crore in interest receipts. Non-tax revenues have been so buoyant in the first nine months that the RE figure would be met, even if receipts were to be 8 per cent lower in the last quarter. With dividends flowing into the treasury alm-ost at will, it may not be unlikely that RE estimates for non-tax revenues may be exceeded, partially offsetting the optimism on tax collections.

On the expenditure side, the RE shows remarkable savings in non-plan revenue expenditure, aggregating Rs 4,583 crore. The big savings have come from subsidies (-Rs 5,200 crore), interest (-Rs 2,748 crore) and grants to states and union territories (-Rs 2,700 crore). These have been offset somewhat by premium on pre-payment of external debt (+Rs 4,080 crore) and economic services (+Rs 2,813 crore). Plan revenue expenditure has seen a rise of Rs 1,143 crore over BE, resulting in an overall saving of Rs 3,440 crore.

The large-scale pre-payment of loans by states has made the picture somewhat complex. Loan recoveries at Rs 64,625 crore were hugely in excess of the BE of Rs 18,023 crore, by a figure of Rs 46,602 crore. However, it is comforting to learn from the expenditure budget (Vol. I), that a provision has been made for exactly Rs 46,602 crore towards the National Small Savings Fund (NSSF). Given that some public sector entities also seem to have done some amount of pre-paying of debt, it is indeed curious that the two numbers ? the excess of recoveries over BE and the investment in NSSF ? should be identical.

However, net of the NSSF adjustment, capital expenditure saw savings of Rs 6,382 crore, primarily on account of defence ? which is clearly a deferment rather than permanent reduction in expenditure. Be that as it may, the total reduction on both the revenue and capital sides have yielded a saving of over Rs 11,000 crore for the Centre. The combination of higher revenue receipts of Rs 9,092 crore ? made up of Rs 3,370 crore from taxes and Rs 5,722 crore from non-tax revenue ? and lower revenue expenditure of Rs 3,440 crore gives a curtailment in the revenue deficit of as much as Rs 12,532 crore. With capital exp-enditure (net of NSSF) lower by Rs 6,382 crore and privatisation proceeds expected to top the BE by Rs 1,300 crore, we have a combined trimming of Rs 20,214 core in the fiscal deficit. Thus, the RE places the fiscal deficit at Rs 1,32,103 crore compared to Rs 1,53,637 crore in the BE. The primary deficit is a quarter of what it was in the BE.

With the effort coming half-and-half from both the revenue and expenditure side, it is an achievement that only the most churlish would fail to commend. Next year?s BE is likely to be subject to significant chang-es when the full Budget is prese-nted. However, the foundation that has been laid this year in terms of fiscal control in an election year hopefully augurs well for fiscal consolidation.

The author is economic advisor to ICRA (Investment Informati-on and Credit Rating Agency)