The NDA government’s maiden Budget focused firmly on fiscal consolidation and retained the ambitious target of 4.1 per cent of the GDP for the fiscal deficit in FY15 while betting on an economic recovery to shore up tax revenues.
Presenting the Union Budget 2014-15 in the Lok Sabha, finance minister Arun Jaitley made it clear the Budget would lay broad policy indicators to revive economic growth to 7-8 per cent over the next three years, along with lower inflation, lesser fiscal deficit and a manageable current account deficit.
“Fiscal prudence to me is of paramount importance because of considerations of inter-generational equity… there is urgent need to generate more resources,” he said.
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Accordingly, he rolled out fiscal consolidation plans under which fiscal deficit would be brought down to 3.6 per cent in FY16 and 3 per cent by FY17. The revenue deficit will be lowered to 2.9 per cent by FY15.
However, Jaitley ruled out further expenditure cuts to control deficit and instead increased the government’s total spending in FY15 to Rs 17,94,892 crore as against the Interim Budget target of Rs 17,63,214 crore, marking a 12.8 per cent hike against the Revised Estimate (RE) for FY14.
The Budget also increased capital expenditure by 26.9 per cent over RE for FY14 and plan expenditure by 20.9 per cent over the RE of FY14 to Rs 5,75,000 crore.
Partially hiking spending on key subsidies to Rs 2,51,397.25 crore for FY14, the Budget intends to make them more targeted and overall spending more efficient.
Jaitley also plans to set up an Expenditure Management Commission “to review allocative and operational efficiencies of government expenditure to achieve maximum output”. Its interim report will be submitted within this financial year.
However, rating agencies remained unimpressed. “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.
The Budget also depends heavily on raising revenues by bringing up the tax to GDP ratio to 10.6 per cent in FY13 from 10.1 per cent in FY14. While gross tax receipts are pegged at Rs 13,64,526 crore, tax revenue is estimated to grow by 19 per cent. Non-tax revenues at Rs 2,12,505 crore, of which disinvestment receipts are pegged at Rs 58,425 crore. This includes Rs 43,425 crore from stake sales in PSUs and another Rs 15,000 crore from sale of residual stake in the erstwhile government companies. Meanwhile, stake sales from SUUTI is expected to raise another Rs 6,000 crore.
The Centre has also marginally raised its gross borrowing target to Rs 6 lakh crore in FY15 from Rs 5.63 lakh crore last year. But net borrowings will be Rs 4,61,204 crore, after considering repayments of past loans and interests.