It's a truth universally acknowledged, to paraphrase Jane Austen, that a treasury in possession of a good fortune, must be in want of a Finance Minister who spends. Wisely, that is.
The BJP may not have been as fortunate at the recent electoral hustings, but the luck of the devil did grace the nation's finances via higher dividend from the RBI and buoyant revenue collections. There won't be a no-claims bonus, like in a health insurance policy, if you don't spend the riches, and so naturally, the treasury is under pressure to do something for everyone.
Such a spending binge will not only restore the government's lost political ground, but importantly, address underlying problems like household stress, youth unemployment and rural distress, which the opposition claims as issues destined for the shelf.
As they say, money makes many things, and so we at The New Indian Express are back to the annual exercise of exploring any better, alternative ways of allocating our resources.
The second edition of the Shadow Budget 2025, unlike the first, showcases income and expenditure estimates that today's India deserves and not what the pressure groups desire and push for.
Anil K Sood, Founder, Institute for Advanced Studies in Complex Choices, an economic research firm, once again worked his fingers to the bone to present the budget, which may well be called an elementary budget for India. Sood's sums include an exhausting account of revenue and spending, broken down all the way to department-wise revenue and capital expenditure allocations, alongside the receipts budget comprising tax, non-tax revenue and debt and capital receipts.
We are yet to recover the output losses caused by the pandemic, and will need another decade altogether to recoup those losses. Though urban economic conditions are far from ideal for accelerating growth, he pegged nominal GDP growth at 11% for FY25, as against the government's estimate of 11.5%. Considering the low GDP deflator, Sood expects real FY25 GDP to settle at 7% or thereabouts, while we need to grow faster than 8% to rebuild the economy.
In all, FY25 expenditure budget was set marginally higher at Rs 48.06 lakh crore than the interim budget's Rs 47.65 lakh crore. The proposed expenditure translates to an increase of 8.2% over FY24's provisional estimates of Rs 44.4 lakh crore. As a percentage of GDP, the shadow budget's FY25 expenditure is pegged at 14.8%, compared to the interim budget's 14.54%.
Unlike in the past where capital expenditure (capex) was the crown of all currency allocations, the shadow budget, however, takes a significant shift, with expenditure set lower at Rs 10.86 lakh crore than interim budget's Rs 11.1 lakh crore. Naturally, revenue expenditure is higher at Rs 37.19 lakh crore, while the government pegged it at Rs 36.54 lakh crore.
Gross tax revenue will likely increase by 12.6% at Rs 39 lakh crore, higher than the interim budget estimates of Rs 38.30 lakh crore. On the face of it, the difference in both these estimates may not be much, but what stands out in Sood's forecast is the revenue mix. While interim budget pegged personal income tax revenue at Rs 11.56 lakh crore, higher than the corporate collections of Rs 10.42 lakh crore, Sood assumed the contribution to be equal from both at about Rs 11.36 lakh crore each.
Within indirect taxes, GST revenue is estimated at Rs 12.66 lakh crore for FY25, or a 12.13% increase over FY24's provisional estimates of Rs 11.29 lakh crore. Likewise, customs and excise duties together will likely fetch a handsome Rs 3.9 lakh crore, while the non-tax revenue is pegged at Rs 4.05 lakh crore, slightly higher than the interim budget estimates of Rs 3.99 lakh crore. Lastly, the Centre's net tax revenue is pegged at Rs 26.26 lakh crore.
Given the increase in allocations, borrowings are estimated at Rs 16.92 lakh crore, a 2.36% increase over FY24's provisional estimates of Rs 16.53 lakh crore, while fiscal deficit is pegged at 5.21% for FY25, marginally higher than interim budget forecast of 5.14%.
Coming to capex, of the 14-odd key ministries, the Ministry of Road Transport & Highways got the cream filling at Rs 2.45 lakh crore. This is lower than the interim budget estimates of Rs 2.7 lakh crore and also lower than FY24's provisional estimates of Rs 2.63 lakh crore. According to Sood, we need to rework the transport policy to ensure that we stop funding vanity projects like bullet trains and highways with poor utilization and focus on decongesting cities and improving railway services.
Two other ministries that saw over Rs 2 lakh crore allocations include the Ministry of Railways and the Ministry of Finance, while the Ministry of Defence saw a capex allocation of Rs 1.72 lakh crore. Again, this is lower than interim budget estimate of Rs 1.82 lakh crore, but saw a modest 4.5% jump over FY24's provisional estimates.
On the revenue expenditure front, as is the norm, the Ministry of Defence and the Ministry of Finance saw the highest allocation of Rs 4.39 lakh crore each, which is similar to the interim budget numbers. The Ministry of Consumer Affairs, Food and Public Distribution, however, saw a higher allocation of Rs 2.5 lakh crore than interim budget estimates of Rs 2.1 lakh crore. Likewise, the Ministry of Agriculture & Farmer's Welfare too saw its revenue expenditure higher at Rs 1.39 lakh crore, while the interim budget pegged it at Rs 1.27 lakh crore.
The Ministry of Home Affairs, however, saw a reduction in expenditure at Rs 1.73 lakh crore, while the government allocated Rs 1.85 lakh crore during the February budget. Some like the Ministry of Health & Family Welfare, the Ministry of Jal Shakti and the Ministry of Rural Development saw allocations in line with interim budget estimates.
