Budget 2019: Piyush Goyal has a tough ask – containing burgeoning government expenditure in election year

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New Delhi | Updated: Jan 25, 2019 9:01 AM

The new appointed finance minister will find it difficult to reduce the widening gap between the centre's net tax revenues and its budgeted expenditure that has gone up from Rs 6.89 lakh crore in 16-17 to Rs 9.48 lakh crore in 17-18.

Budget 2019 ExpectationsBudget 2019 Expectations: Piyush Goyal

Budget 2019: Piyush Goyal has an unenviable task at hand when he presents the Union Budget on February 1 in place of his colleague Arun Jaitley who is undergoing treatment in New York. The newly appointed finance minister will have to balance the spending expectations in an election year with the resources he has at his disposal.

The central government’s expenditure has risen by over 10% in the last three years and the gap between net taxes collected and the total expenditure has been rising. Its net tax revenues were Rs. 11.01 lakh crore in FY 2016-17 as against the budgeted expenditure of Rs. 17.9 lakh crore that year which is nearly 163% of the net tax revenue.

As per the revised estimates for FY 2017-18, the centre’s net tax collection rose by 15.25% to Rs 12.69 lakh crore whereas its total expenditure through budget rose to Rs 22.17 lakh crore which was 174.7% of the net revenues collected by the centre that year.

Finance minister Arun Jaitley has projected net tax revenues of over Rs 14.80 lakh crore for 2018-19. In the last year’s budget, he has also projected a total expenditure of Rs 24.42 lakh crore, which is 165% of the taxes revenues projected for the financial year, indicating a reduction in the gap between net tax collected by the centre and its budgeted expenditure. However, there are clear indications that the gap will only increase this year.

NDA government is facing unprecedented demands for concessions from several quarters in the election year, including from farmers, youth, middle class, small industries and big corporates. There are demands for some kind of universal basic income for youths, a cut in income tax rates for middle class and salaried people, and also a cut in corporate tax rate for large corporates. The NDA government is also reportedly mulling some kind of support for farmers on the models of Telangana and Odisha.

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Secondly, as per the statement of variation between the budget estimates (BE) and the revised estimates (RE) for FY 2017-18, total budgeted expenditure of the centre had gone up by an additional Rs. 71,000 crore over and above the projected increase of over Rs. 1,32,000 crore for that year. This trend of increase in total budgeted expenditure of the central government coupled with the multiple demands for concessions completely negates any room for Piyush Goyal to follow the path of fiscal consolidation as was promised by Arun Jaitley in the first budget of Modi government.

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