What we could have missed in the Budget? Business Line 2nd Feb 2022

 Budgets are data heavy documents as they tell us all about government finances for the year. The speech is also fairly comprehensive and tells us about the direction the government is moving. There is a lot of talk of focus areas and actions taken or to be taken. But there can be some numbers that may miss our attention which need to be brought to the fore.

First the GDP growth number. The Budget has assumed growth rate of 11.1 per cent in nominal GDP which brings the absolute number to ₹258 lakh crore. The Economic Survey projected real GDP growth to be 8-8.5 per cent. Nominal GDP growth is defined as real GDP growth plus inflation. With a number of 11.1 per cent, either the real GDP growth assumed is lower or inflation is ridiculously low at 3 per cent. More details are needed here.

Disinvestment numbers

Second, in the speech the Finance Minister said that the LIC disinvestment would be completed this year and hence there would be no spillover to FY23. That sounds good and reassuring. But interestingly the Budget puts the revised number for FY22 at ₹78,000 crore and ₹65,000 crore for FY23. Two questions pop up. First, evidently the LIC disinvestment amount is not part of both the years. Or if so, it is certainly not ₹1 lakh crore.

The government is probably playing safe by keeping it in a buffer. The second question is that if LIC is not part of the ₹78,000 crore, and if the achievement till December is ₹9,300 crore, how would the balance accrue?

The third observation is on subsidy. There is a reduction in subsidy for fertiliser and food by around ₹35,000 crore and ₹80,000 crore respectively. This means that the government will be withdrawing the free food programme which was in force in FY21 and FY22. The other is that fertiliser prices would be open to market influences and with crude oil prices likely to remain high, there would be pressure on prices.

Excise numbers

Fourth, the excise collections on petrol has shown a varying trend. In FY21 it was ₹3.91 lakh crore and was targeted at ₹3.35 lakh crore for FY22. The revised number comes in at ₹3.94 lakh crore while the budgeted amount for FY23 is ₹3.35 lakh crore. The excise duty on petrol and diesel was lowered in November 2021. The lower target for FY23 can mean either that there is a correction due to this reduction of ₹10/litre or that there could be some more cuts in the coming year depending on the evolving situation.

Fifth, the government has also rolled back the outlays on PM Kisan and NREGA. The PM Kisan started off as an ₹75,000- crore programme but has now come down to ₹68,000 crore. It was expected that there could be a temptation to increase this in an election year, but prudence has prevailed. Also NREGA has been rolled back to ₹73,000 crore.

It may be assumed that if required the government could always raise the fertiliser and food subsidy or outlays on NREGA again.

GST compensation

Sixth, the GST compensation fund is slightly higher at ₹1.2 lakh crore. This means that there could be still slippages in FY23 besides the arrears that have to be paid to States for the last year.

Seventh, while one normally focusses a lot on the borrowing programme of the government to cover the deficit, there is another component that has been used in large quantities which is the NSSF. ₹4.25 lakh crore has been drawn from the small savings fund for FY23. Interestingly for the three-year period 2020-21 to 2022-23, the average withdrawal has been ₹5 lakh crore, which is quite large. This has lowered the extra pressure on the market which would have been pressurised in case gross borrowings were higher by this amount.

Eight, the income from dividends and interest for FY23 has been put at a lower rate of ₹1.13 lakh crore as against ₹1.47 lakh crore. Here it may be said that the contribution of the RBI would be lower relative to the previous year.

Nine, while there have been critics who have said that the government had not spent much even if it meant higher borrowing at a time of the pandemic, the overall debt situation of the government is quite startling. Total liabilities of the government were ₹102 lakh crore in FY20 which is the pre-pandemic year. In FY23 it is expected to be ₹152 lakh crore. This means that we have added ₹50 lakh crore as debt in the last three years which is quite prodigious. Needless to say while market borrowings accounted for around 60 per cent, another 25 per cent came from small savings. This large jump in debt has also caused interest payments to increase by ₹1.37 lakh crore.

Lastly, on the size of the Budget there are some interesting numbers. The difference between the revised and budgeted number for FY22 was ₹2.87 lakh crore which was accounted for primarily by revenue expenditure (82 per cent). For FY23, total expenditure is to increase by ₹1.74 lakh crore with 85 per cent going for capex. This is a major achievement.