FY19 possible Budget size: ~23.4 lakh crore
As the finance ministry starts its Budget preparations, one number will act as the starting point for all the work it does between now and February 1: ~23.4 lakh crore. That is the projected expenditure, and hence, the possible size of the Budget, for 2018-19, as laid out in the Medium Term Expenditure Framework (MTEF). The 2017-18 MTEF, tabled in Parliament in August, projects expenditure and its break-up into various categories, allocations, and classifications for 2018-19 and 2019-20. ARUP ROYCHOUDHURY writes
As the finance ministry starts its Budget preparations, one number will act as the starting point for all the work it does between now and February 1: ~23.4 lakh crore. That is the total projected expenditure, and hence, the possible size of the Budget, for 2018-19, as laid out in the Medium Term Expenditure Framework (MTEF).
The 2017-18 MTEF, tabled in Parliament in August, projects expenditure, and its breakup into various categories, allocations and classifications, for 2018-19 and 2019-20. The projected total spending is 9 per cent higher than the 2017-18 total Union Budget size of ~21.47 lakh crore.
“The MTEF projections will serve as a base, a starting point really, for how the government plans its 2018-19 Budget,” said a senior finance ministry official.
“Together, with the demand-wise revenue-capital allocations projected by the ministries, the scheme-wise MTEF statements will give focus to the ministries’ expenditure in the medium term. The Budget Estimates of the ministries shall conform to the projectionscontained in the MTEF statement and there shall not be any deviations from the MTEF projections,” the circular stated.
Officials, however, say that there are likely to be deviations from the MTEF projections for various ministries, based on what the spending needs of the Centre will be. The 2018-19 Budget is expected to be the last full Budget before general elections in 2019. Hence, it is expected to contain feel-good announcements and sops for rural voters and the middle class. It may also push for a surge in capital spending at a time when that seems to be the only instrument that the Centre directly controls to boost economic activity and create jobs. This will all have to be done after assessing the possible revenue projections for the next year, and keeping in mind that the government may aim for a fiscal deficit at 3 per cent of gross domestic product (GDP) in 2018-19, as recommended by the Fiscal Responsibility and Budget Management committee’s report.
The MTEF forecasts revenue or administrative spending of ~20 lakh crore in 2018-19, compared with budgeted estimates of ~18.37 lakh crore for 2017-18. Capital expenditure is forecast at ~3.41 lakh crore for 2018-19, compared with nearly ~3.1 lakh crore budgeted for 2017-18.
Additionally, the Centre estimates nominal GDP growth of 12.3 per cent for 2018-19 and 2019-20, and has reiterated its fiscal and revenue deficit targets for the next two years. It sees a fiscal deficit target of 3 per cent of GDP each for 2018-19 and 2019-20, and revenue deficit of 1.6 per cent and 1.4 per cent for the two years. For 2017-18, nominal GDP is forecast at 11.75 per cent, and the fiscal and revenue deficits are budgeted at 3.2 per cent and 1.9 per cent, respectively.
Among the major expenditure items, revenue expenditure in defence, excluding salaries and pensions, is expected to grow by about 10.4 per cent in 2018-19, the framework document stated. This pushes defence revenue expenditure to ~2,01,511 crore in 2018-19. In terms of capital spending, mainly to buy new weapons and equipment, defence could see spending rise from ~91,580 crore in the current fiscal year to ~1.01 lakh crore in 2018-19.
As far as the Centre’s subsidy commitments are concerned, the fertiliser subsidy outlay is projected to be flat at ~70,000 crore between the current fiscal year and 2019-20.
The food subsidy bill will rise to ~1.75 lakh crore in 2018-19, compared with 2017-18 budgeted estimates of ~1.45 lakh crore. However, the petroleum subsidy is expected to drop sharply to ~18,000 crore in 2018-19, from ~25,000 crore in the current fiscal year.