Ind-Ra sees Budget numbers more credible, achievable
India Ratings on Monday said the Budget numbers are more credible and achievable than in the past many years, and the government may even exceed the revenue targets if the current tax buoyancy level is maintained.
The fiscal arithmetic in Budget 2021-22 is more convincing than earlier years. At the core of the Budget is the nominal GDP growth of 14.4 percent, which looks plausible with 10 percent real GDP growth, India Ratings Chief Economist Devendra Pant and Principal Economist Sunil Kumar Sinha said in a note.
But, they quickly underlined that the success of fiscal arithmetic hinges on the success in achieving the Rs 1.75 lakh crore (Rs 75,000 crore from disinvestment and Rs 1 lakh crore from selling government stake in public sector banks and financial institutions) disinvestment targets.
Meanwhile, the fiscal deficit more than doubled to Rs 18.48 lakh crore in 2020-21 (revised estimate) from Rs 9.34 lakh crore in 2019-20.
The contribution of lower receipt to this increased fiscal deficit was 16.5 percent and higher expenditure was 83.5 percent and that any improvement in fiscal deficit of FY22 should come mainly from receipts side.
In 2020-21, Rs 54,522 crore of fiscal deficit was externally funded, mainly from multilateral agencies, and this is budgeted to decline to Rs 1,514 crore in FY22.
Net market borrowing is budgeted to slip to Rs 96,771 crore in 2021-22, from Rs 12.74 lakh crore in 2020-21.
We feel that while higher growth will lead to higher savings, the same could fund increased government expenditure. As a result, interest rates are unlikely to be significantly different from where they are at present, they said.
On the whole, the Budget presses the right buttons. Also, by not putting additional tax/cess burden on the people and funding the deficit through borrowings, we expect the budget to support the incipient economic recovery through a judicious mix of spending.
But, the size of the overall expenditure is capped at Rs 34.83 lakh crore, which is only marginally higher than in 2020-21 at Rs 30.42 lakh crore.
Net-tax revenue to GDP is budgeted to increase to 6.93 percent in 2021-22 from 6.90 percent in 2020-21, which also appears quite achievable. Gross and net tax revenues are budgeted to grow at 16.4 percent and 15.6 percent, respectively, which appears plausible as well, they said.
If the trend of higher GST collections witnessed in the third quarter of FY21 continues along with a growth recovery in 2021-22, it may help the government achieve or even surpassing FY22 GST collection target. The net tax collection of the central government has grown more than 50 percent on year in Q3 of FY21, they said.
Noting that many expenditure announcements in the Budget should not be taken as proposed expenditure in FY22, the agency pointed out that non-interest revenue expenditure is budgeted to decline 8.6 percent from 22 percent in 2020-21, as due to the high growth in 2019-20 and 2020-21, a contraction appears realistic.
This means the government may be withdrawing a part of the stimulus when the economy starts stabilising.