Despite concerns over its fiscal consolidation plan, the finance ministry is hopeful of meeting its deficit targets through savings in its subsidy bill.
“Roll out of the Food Security Act has been deferred by three months. So actual expenditure on the food subsidy will be only for seven months although we have made allocations for a full year,” Arvind Mayaram, finance secretary told The Indian Express.
The Union Budget 2014-15 has allocated Rs 1,15,000 crore as food subsidy as against Rs 80,000 crore in FY14. Apart from the delayed roll out of the Act, Mayaram said, “We have a lot of cushion in expenditure as we have budgeted additional Rs 35,000 crore as food subsidy this fiscal.”
Private analysts and rating agencies have raised concerns over the Centre’s fiscal consolidation roadmap that envisages a fiscal deficit of 4.1 per cent of the GDP, with a near 13 per cent hike in total expenditure at Rs 17.93 lakh crore as well as partially higher subsidy bill of Rs 2.51 lakh crore.
Tax revenues are estimated to rise by a buoyant 19.8 per cent to Rs 13,64,526 crore in the current fiscal.
The finance secretary was also optimistic of the Budget’s allocation of Rs 63,426.95 crore as fuel subsidy. “Oil is a big risk due to the crisis in Iraq as well as concerns over Israel and Hamas. But most pundits have predicted that oil prices will not be rising,” he said.
For calculating the Budget Estimates, the finance ministry has taken global crude oil prices at $110 per barrel and the value of the rupee at 61 against the US dollar.
“But crude oil prices in the international markets are ranging at $108 a barrel today while the rupee has gone down below the 60 level. All this will help us meet our targets,” said Mayaram, adding that even if there is a marginal shortfall in the revenue, it will be met by this cushion on the expenditure front.
However, the finance ministry is also extremely upbeat about its targets for tax collection and is hoping for higher tax buoyancy as the economy revives.
While the tax to GDP ratio was 10.1 per cent in FY14 when GDP grew by 4.7 per cent, the Budget has pegged the tax to GDP ratio at 10.6 per cent this fiscal with a growth rate of 5.4 per cent to 5.9 per cent. “On the current analysis the numbers are absolutely credible,” the finance secretary said.
However, global rating agencies had questioned the Budget numbers. “We are surprised the Budget has stuck with the outgoing government’s fiscal consolidation path. The revenue measures that were announced today actually have the net effect of reducing revenues by 0.1 per cent to 0.2 per cent of GDP,” said Fitch in a statement on Thursday.