Shadow of FY20 budget’s unfinished tasks

New Delhi: Finance Minister Nirmala Sitharaman, who will attain the distinction of presenting two budgets in less than a year, will be in focus in February as to how she steers the economy out of one of the most challenging times.

She has not seen the best of the times on the growth side since she assumed office at North Block in June 2019.

Here is a synopsis of the performance of different departments and the Finance Minister’s team members for the 2020-21 budget.

DIPAM: The Department of Investment and Public Asset Management has been far from the target. Despite seeing the secretary-level changes twice, the gap between the goal and the reality has remained large.

After two years of surpassing targets, it is likely to miss the goalpost by a wide margin with only Rs 18,022 crore in its kitty, so far. The delay in the privatisation of Air India, BPCL and Concor could be attributed to that. But Tuhin Kant Pandey, who joined the DIPAM in October, is certainly not to be blamed.

Department of Financial Services: The Reserve Bank of India and the government are not on the same page over the banking sector NPAs. While the RBI said the lenders’ dud assets |might grow to 9.9 percent by September, Finance Secretary Rajeev Kumar said the NPAs were on a downward journey.

In the case of NBFCs liquidity, the RBI, the PSBs and the DFS are striving to revive rural demand and consumption through lending by shadow banks. However, without any luck.

Also, banks’ credit growth slowed to 7.2 percent to Rs 86.73 lakh crore this November from 13.8 percent rise to Rs 80.93 lakh crore in the year-ago month, according to the RBI.

Loans to industry growth declined to 2.4 percent to Rs 27.72 lakh crore in November from 4 percent in the same month of 2018. During the month, credit to agriculture and allied activities and services sector decelerated sharply.

Kumar, who retires after the budget, will have to see that the credit expansion doesn’t slow further.

Expenditure Department: Due to the fragile financial situation, the Finance Ministry last month capped expenditures for the last quarter of FY20 under revised criteria of 3-8 percent reduction from the existing figures and directed all the departments and ministries to stay within the restricted budgeted expenditures.

New Expenditure Secretary T.V. Somnathan is using his experience to control a situation where revenues are not rising but expenditure is. The fiscal deficit hitting 115 percent of the budget estimate till November must have set alarm bells as the possibility of a major rise in tax revenues or disinvestment proceeds is nearly zero.

Add to it the Rs 1.45 lakh crore impact of lowering of the tax rate for corporates on the revenue mobilization. More borrowing is not an option either.

Of the total revenue expenditure, Rs 3,41,812 crore is on account of interest payments and Rs 2,35,015 crore on account of major subsidies that couldn’t be tinkered with. Income support to farmers and food subsidy bills have taken a big hit in terms of revenue expenditure, something Somnathan would not touch.

Department of Revenue: It faces a common expectation of a cut in personal income tax even as the revenue growth remains muted. The corporate tax rate reduction to 22 percent from 30 percent, and to 15 percent from 25 percent for new manufacturing entities, has only increased the common man’s expectation from the budget.

As on November 30, the gap between expenditure and revenue was at Rs 8.07 lakh crore, while the target is at Rs 7.03 lakh crore, with an aim to restrict the deficit at 3.3 percent of the GDP. Any shortfalls in GST collections and direct tax revenues are purely undesirable.

But it’s not in Revenue Secretary Ajay Pandey’s hands.

With a persisting slowdown and lack of industrial activity, both GST and direct tax revenues are expected to be below targets. In the July budget, the government had set a lofty tax target despite a shortfall last year.

The estimate for gross tax revenue for 2019-20 was revised to Rs 24.6 lakh crore from 25.5 lakh crore, announced in the interim budget in February. It was an 18 percent raise over the tax collected in 2018-19.

At the aggregate level, the Centre’s gross tax revenues have grown by only 0.81 percent in the first eight months (April to November) of FY20 and the corporate tax collection has contracted to 0.91 percent against the targeted 15.4 percent.

The central GST mop-up at the end of December would stand at Rs 3.72 lakh crore, against the full-year target of Rs 5.26 lakh crore. Tech-savvy Pandey may go for some out of the box processes to keep tax revenues coming, albeit slowly, this year and the next budget target. (IANS)

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