When we evaluate the Budget 2021-22 to look for the gross misses, let us not lose the sight of the facts of constraints faced by the Finance Minister Nirmala Sitharaman. The previous budget 2020-21 had estimated Rs 24.2 lakh crore gross tax collections but the actual fell short of its target by Rs 5.2 lakh to Rs 19 lakh crore. This is lower than previous year’s Rs 20 lakh crore.
The above shortfall is largely on account of a shortfall of Rs 2.34 lakh crore in corporate taxes. The budget 2020-21 had estimated Rs 6.8 lakh crore for corporate taxes against which the collection as per the revised estimate is Rs 4.46 lakh crore. The shortfall in income tax collection has been to the tune of Rs 1.8 lakh crore against budget estimate of Rs 6.38 lakh crore. The GST collection in the passing year is likely to be around Rs 5.15 lakh crore against the previous budget target of Rs 6.9 lakh crore.
Given the above figures, the revenue estimates in the Budget 2021-22 are also pegged at lower figures. Thus the inability of the Finance Minister to maintain the stream of revenue has made the government to rely on more debt. The debt will fund 54 per cent of the government’s total expenditure of Rs. 34.50 lakh crore (revised) for FY 2020-21 and 43 per cent of the total expenditure of Rs. 34.83 lakh crore for FY 2021-22.
The Budget 2021 proposes a sharp increase in capital expenditure and likes to fuel growth by government induced spending against the domestic consumption fuelling demand. The service sector remains ignored and the badly hit tourism and the hospitality sector found no solace from the budget. That’s not all. The key desired sectors like that of agriculture, defence, education and health, got much less when compared to the last year.
The allocation to the agriculture, cooperation and farmers’ welfare is slashed by 8.5 per cent in 2021-22. The flagship PM-KISAN scheme meant to provide income support to farmers saw a 13 per cent drop in its budget which is Rs 10,000 crore lower than last year’s budgeted allocation. The schemes to provide a remunerative price for farm produce such as PM AASHA and the Price Support Scheme have seen budget cuts of 25 per cent.
According to the Economic Survey data, nothing has yet been spent out of the Agriculture Infrastructure Fund of Rs 1 lakh crore or the Animal Husbandry Infrastructure Fund of Rs 15,000 crore, although they were supposed to have been part of the previously announced stimulus package. Out of the above Rs 1 lakh crore, only loans worth Rs. 2,991 crore received sanction as of mid-January 2021.
The new defence budget only provides for 0.4 per cent hike in capital expenditure. The total allocation for defence in 2021-22 including pensions is Rs 4.78 lakh crore compared to Rs 4.71 lakh crore last year. Similar cut is proposed for school education to the extent of Rs 6,000 crore. The allocation to the education ministry for the coming financial year is Rs 93,224 crore and stands much less than what was initially promised last year. Instead of more planned allocation to arrest the falling Gross Enrolment Ratio due to the pandemic, the planned expenditure for this year is lower than the two previous years.
Though we acknowledge that the health sector got due weightage in the budget in view of the pandemic with a figure of Rs 223,846 crore. If we leave aside the vaccination cost of Rs 35,000 crore and the Finance Commission grants amounting Rs 49,214 crore, the total amount allocated to the Health Ministry and to fund all the schemes that fall under it is Rs 73,932 crore. This is actually less than the revised estimate for last year Rs 82,928 crore.
The new budget failed to recognise the worst decline in per capita income in India. This contraction is one of the worst among the world’s major countries and has been around 8.7 per cent. At a time of rising inequalities of income and unemployment, the budget could have comprehensively focused on the MSME sector for generation of employment. Similarly, the budget could have put in more money in the hands of poor households and the salaried middle class. The possibility of putting incremental income in the hands of middle and lower-income groups that have gone into the consumption thereby helping the cause of reviving growth is badly lacking. Similarly, there is absence of targeted employment programme to alleviate the immediate unemployment crisis.
The budget solely focuses on stepping up demand in the economy through pumping public investment by additional 34.5 per cent in the coming fiscal year. The realisation of these plans rests on tax realisations, disinvestment proceeds, and the government’s ability to raise resources from the market. We will have to await for a quarter to see the trend of tax revenue inflows the set disinvestment target at around Rs 2 lakh crore for 2022 looks unrealistic when 2021 disinvestment revenues are likely be at a five-year low of around 20 per cent of the annual target. The government will also have to wary about resorting to market borrowings without risking interest rates rise for the private sector.
Despite all good intentions the government has, the excuse of less options before the Finance Minister will not prevent the budget from a closer scrutiny in terms of misplaced priorities. The apathy of the budget those who lost jobs and livelihoods due to the health and economic shocks seem insensitive. If this has been due to an inadvertent oversight it must be corrected, but if the vision has been myopic it will prove very costly.
(The author is a popular columnist and commentator on polity and economy. He has a PhD in Finance from IIT Bombay and Post Doc Fellow in Economic Policy)
