The mystery of the ‘missing’ Rs.1.7 lakh cr in Budget

NEW DELHI, JUL 10 (AGENCIES) | Publish Date: 7/10/2019 11:30:24 AM IST

Three days after the Union Budget was presented, questions have surfaced over a nearly Rs. 2 lakh crore ‘fiscal hole’ in India’s financial accounts, NDTV report stated.

The anomaly was first picked up by Rathin Roy, a member of the Prime Minister’s Economic Advisory Council. Writing in the Business Standard, he studied both the Economic Survey and the Budget and found that the revenue estimates for 2018-19, in other words how much the government has earned, is a percentage point lower in the Survey than cited in the Budget.

That percentage point amounts to a whopping Rs. 1.7 lakh crore, a massive shortfall in earnings.

The Budget uses what is called the Revised Estimates (RE), a projection of how much the government was expected to earn, while the Economic Survey uses what is known as provisional actuals (PA), an updated, more accurate estimate of government accounts.

The Revised Estimates used in the Budget show earnings of Rs. 17.3 lakh crore in 2018-19, while the updated, provisional accounts in the Economic Survey show that the government has earned far less, Rs. 15.6 lakh crore, a shortfall of Rs. 1.7 lakh crore.

In percentage terms (total revenue as percentage of GDP), the Revised Estimate in the Budget pegs the figure at 9.2 per cent, while the updated number in the Economic Survey shows this as a whole percentage point lower at 8.2 per cent.

This discrepancy is also reflected in government spending. Spending was shown in the Budget at Rs. 24.6 lakh crore in 2018-19, while the more accurate figure in the Economic Survey shows that the government only spent about Rs. 23.1 lakh crore, about Rs. 1.5 lakh crore less.

The source of the shortfall: a drop in tax revenue. While according to the Budget, it was expected that the government would earn about Rs. 14.8 lakh crore from taxes last year, the Economic Survey’s more updated figures tell us that they only earned about Rs. 13.2 lakh crore.

Questions sent to the Finance Ministry did not meet with a reply.

Pronab Sen, former Chairman of the National Statistical Commission and India’s First Chief Statistician, told NDTV: “This is very much a matter of concern.”

“As I make out, the figures in the Economic Survey are much closer to the (actual) figures. The figures in the Budget are way, way higher. Now the problem this causes is if you have to meet your fiscal deficit target, you’re going to have dramatic cuts somewhere in the Budget. This really sends the plans of the Ministry haywire”, he said.

“If the provisional actual figures are correct, then the only (solution) is to present a new Budget”, said Jayati Ghosh, professor of Economics at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.

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