What does a deeper look at the Budget 2024 maths reveal?

Summary

In this episode of Mutra, Deputy Editor Sharad Ragavan and Associate Professor Radika Pande dissect the intricacies of the recent budget. They discuss the balance between fiscal consolidation and expenditure, with a focus on increased revenue expenditure and steady capital expenditure. The conversation spans tax revenue projections, the quality of government spending, and the fiscal deficit target set at 4.9%. They also touch on the government's shift towards reducing the debt-to-GDP ratio and the implications of factor market reforms.

Takeaways

• 📈 The budget projects an increase in revenue expenditure by 55,000 CR compared to the interim budget, while keeping capital expenditure the same at 11.11 lakh CR.
• 💼 The government received a higher-than-anticipated dividend from the RBI, providing additional fiscal space of around 1.5 lakh CR, which influenced the budget allocations.
• 🏢 There's a strategic balance in the budget aimed at accelerating fiscal consolidation while also boosting spending, with a tilt towards the former.
• 💼 The employment incentive scheme and PM AAS yoga are among the areas receiving increased funding in the budget.
• 📉 The net tax revenue projection for the central government has been reduced by around 18,000 CR compared to the interim budget, with states receiving a larger share.
• 📊 The gross tax revenue projections for the year are similar to the previous financial year, with a slight reduction in corporate tax expectations due to subdued company profits.
• 🌐 The nominal GDP growth assumption is conservatively set at 10.5%, which could provide a cushion for tax revenue if it surpasses this estimate.
• 🔽 The fiscal deficit target for the year is set at 4.9% of GDP, with plans to reduce it further to 4.5% in the next financial year.
• 📉 There's a reduction in the government's reliance on short-term borrowing, which could help in reducing market yields.
• 🌐 The government is shifting its focus from just meeting fiscal deficit targets to reducing the debt-to-GDP ratio, indicating a new fiscal policy framework.

Q & A

What was the main focus of the discussion in the video?

The main focus of the discussion was the analysis of the budget, particularly the changes in revenue and capital expenditure, tax revenue projections, and the government's fiscal consolidation strategy.

How did the post-election budget projections differ from the interim budget projections?

The post-election budget showed an increase in revenue expenditure by 55,000 CR compared to the interim budget, while keeping the capital expenditure the same. The government used the additional RBI dividend to increase revenue expenditure and reduce the deficit.

What was the additional revenue expenditure allocated for in the budget?

The additional revenue expenditure was allocated for employment incentive schemes, increased allocation for PM AAS yoga, and financial assistance for states like Bihar and Andhra Pradesh.

How did the tax revenue projections for the full year budget compare to the interim budget?

The gross tax revenue projections were broadly the same between the interim and full year budgets, with a slight reduction in net tax revenue to the central government, which was compensated to the states.

What was the projected growth rate for income tax and corporate tax collections in the budget?

The projected growth rate for income tax was around 13.5%, which was considered realistic. The corporate tax growth rate was scaled down to 12.8% from the interim budget's projection of 14.5% due to subdued company profits.

What was the nominal GDP growth assumption in the budget, and why is it considered conservative?

The nominal GDP growth was assumed to be 10.5%, which is considered conservative because it assumes a real GDP growth of 7% and a GDP deflator of 3.5%. This is seen as conservative because recent trends show WPI and CPI inflation rates that could push nominal GDP growth higher.

What was the government's target for fiscal deficit in the budget?

The government targeted a fiscal deficit of 4.9% of GDP for the year, which is a step towards the fiscal consolidation path with a target of 4.5% for the following year.

How did the budget address the issue of borrowing and debt?

The budget aimed to reduce reliance on short-term borrowing and increase long-term borrowing to manage debt more effectively. It also indicated a shift in focus from targeting a specific fiscal deficit number to reducing the debt to GDP ratio.

What was the government's approach to factor market reforms as discussed in the budget?

The government announced a new economic framework that would include factor market reforms such as land and labor, with an emphasis on collaboration between the central government and state governments. The budget also tied a portion of the capital expenditure allocation to the implementation of these reforms.

What was the audience's question regarding the government's commitment to the new tax regime?

The audience questioned why the government was not encouraging public investments by increasing ATC limits, given its commitment to the new tax regime. The response indicated that the government was nudging people towards the new tax regime, which does not have many exemptions and deductions, and that future incentives would be provided under the new tax regime.