Contractionary or ambitious?: Numbers tell the tale

Illustration: TBS

There are two ways to look at the proposed budget figures – comparing them with this outgoing year's revised ones, and comparing them with the previous year's actual achievement. This will give two different pictures – the proposed budget is both contractionary and yet can be dubbed as ambitious as even the conservative budget can falter because of the persisting poor capacity for implementation.

If we look at the tax revenue target of the next fiscal year, it looks like a moderate one with a 15.4% increase from this year's revised one. And even a smaller 10% increase from the original figure of this outgoing year. Given the high inflation officially put at 9.89 percent, these are modest targets.

 But if we compare the proposed revenue figure with last year's actual figure, then it is a sizable 51% increase.

The inevitable question then comes: Is it possible to increase tax revenue by over 50% in just two years' time?

The finance minister has proposed a plethora of new tax measures including putting in a new income tax slab of 30% for the ultra-rich and slashing tax exemptions on a wide number of products and services to plough in more money. The proposed effort to make transactions cashless in order to avail reduced corporate tax will also bring transparency and increase collection.

And yet, only time will tell how much of it will work in a time of economic stress.

A similar picture can be drawn from the expenditure figures.

Operating expenditure is slated to increase by a meagre 11.9% next fiscal year from this outgoing year's revised figure. If we compare next year's proposed figure with the outgoing year's proposed number, then the operating expenditure increases only 6.7%.

But expenditures have always far exceeded the planned number. So, if we compare the proposed budget's operating expenditure with last fiscal year's actual result, then it shows a 37% increase.

Then the question comes whether we can contain spending overruns?

The Annual Development Programme (ADP) that has a direct link with infrastructure building and so on that puts money in people's pockets, especially in the rural and semi-urban areas, also appears to be very modest. It is slated to be only 8.2% more than this outgoing year's revised number, or for that matter, even a smaller 0.8% increase over this outgoing year's proposed figure.

But then again, it is 38% bigger than last fiscal year's actual implementation of the ADP.

This raises the question whether the government can implement even this smaller ADP. If not, then the contractionary nature of the budget will remain by default with implications on growth and employment.