Fiscal deficit goalposts shifted; focus on PSU capex, channelling public savings.
Finance minister Arun Jaitley’s first full Budget is based on the premise that increasing public investments in infrastructure is one of the main ways to boost growth, even as he got a statistical reprieve that has helped project GDP growth between 8 per cent to 8.5 per cent in 2015-16.
While Jaitley chose to shift fiscal deficit goalposts for 2015-16, he is clearly looking to raise public investments through other channels such as public sector firms and channelising savings into gold deposits and gold bonds. This is in line with the Economic Survey’s suggestion to switch expenditure from consumption to savings.
Accordingly, PSUs have been mandated to increase their capital spends or the Internal and Extra Budgetary Resources (IEBR) by 28 per cent to Rs 3,17,889 crore in 2015-16 from the Budget estimate of Rs 2,47,941 crore this fiscal. It also marks a Rs 80,844 crore increase over the revised estimate of Rs 2,37,045 crore this fiscal.
“It is no secret that the major slippage in the last decade has been on the infrastructure front. Our infrastructure does not match our growth ambitions. There is a pressing need to increase public investment,” Jaitley stressed in his speech.
This push to capital spending by PSUs marks the sharpest rise since 2010-11 when the IEBR component was raised to Rs 2,43,884 crore from Rs 2,08,081 crore BE in 2009-10. Better infrastructure would also help attract more investments, in turn giving a push to economic growth and job creation.
“Postponing the achievement of 3 per cent fiscal deficit target to make space for more public investment is admirable as India is still on its recovery phase.The areas of discomfort are the shift from the direct tax bucket to an indirect tax bucket which might impede the tax buoyancy of the government to meet the fiscal deficit,” said Arun Singh, senior economist, Dun & Bradstreet (India).
Jaitley is hoping that higher growth will improve tax buoyancy and ease pressure on the fisc but has tried to keep projections more realistic.
Gross tax revenue is estimated at Rs 9,19,842 crore in 2015-16, marginally lower than Rs 9,77,258 crore in BE 2014-15. It will increase from 9.9 per cent of GDP in RE 2014-15 to 10.3 per cent in 2015-16, marking a growth of 15.8 per cent over the previous RE.
The Budget, despite the disinvestment target of Rs 69,500 crore, has kept a projected non-tax revenue at a modest Rs 2,21,733 crore in 2015-16 as against the BE of Rs 2,12,505 crore in 2014-15, underlining that “growth in this component of revenue is limited as is expected that in next two years it will register modest growth”. But giving a miss to the interim report of the Expenditure Finance Commission that suggested expenditure control, the Budget has only marginally slashed its total expenditure to Rs 17,77,477 crore in 2015-16.