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The concern raised in some quarters that the budget numbers for 2021-22 might be unrealistically optimistic seems misplaced. The Centre’s fiscal deficit is pegged at 9.5% of GDP in 2020-21, due to the pandemic that significantly dented tax and non-tax revenues, and called for higher outlays even as GDP shrank.
The targeted reduction in fiscal deficit next fiscal is due to a reduction in expenditure to 15.6% of GDP from the level of 17.7% of GDP in 2020-21and a marginal increase in gross tax revenues (GTR), even with a 34% rise in capital expenditure. Gross tax revenue, at Rs 22,17,059 crore, is 16.7% higher than the RE of 2020-21, and about 9.9% of GDP.
This is not overambitious. It is only 0.1% higher than the GTR-to-GDP ratio of 9.8% in the RE of 2020-21. The need is to raise efficiency in tax administration. The uptick in GST revenues in January again shows that deploying data analytics to pursue audit trails in the income and production chain helps boost revenues.
With better data mining and analytics, tax collections can only go up further. Broadening the GST base and reducing the number of rates, as recommended by the Fifteenth Finance Commission, will increase efficiency and also shore up direct tax collections.
However, the rise in import tariffs and projected customs revenue mean additional levels of protectionism for some lines of production. The government has also budgeted to raise Rs 1.75 lakh crore through disinvestment and strategic sales in the coming fiscal. It depends on privatisation of BPCL and other firms. The target can be achieved provided the government starts divestment early in the fiscal, instead of waiting for the right time. Implementation holds the key to the viability of the budget numbers.
This piece appeared as an editorial opinion in the print edition of The Economic Times.