A launch pad for 2019

Revenue receipts the FM did not provision for this time will allow him to present a feel-good budget next year

formation over the years — requires political guts, asking banks to take big hair cuts, write down losses. Modi fears this will give the Congress and the Opposition a handle to mock him for letting the corporates get away. He does not seem to have recovered from Rahul Gandhi’s “suit-boot ki sarkar” jibe two years ago.

Despite the huge downside to growth, Jaitley hasn’t loosened his purse strings. The budget is shorn of the heroics shown by the prime minister in his radical demonetisation decision in November. There is no remarkable step up in spending to compensate the informal sector that is a big employer or farmers. The total expenditure for 2017-18 is estimated to increase by just Rs 1,32,328 crore (6.57 per cent), compared with a phenomenal Rs 2,23,624 crore (12.48 per cent) boost that budget 2016-17 received. The projections on gross tax receipts for the next year are modest at 12 per cent against 17 per cent this year. In direct taxes, the budget estimate for the next year is approximately the same as that of the Revised Estimate for the current year, despite expected buoyancy in personal income tax.

But interestingly, Jaitley hasn’t budgeted for two substantial revenue components in his Receipts document — the tax inflows from the Income Disclosure Scheme (IDS) announced post-demonetisation and a windfall equal to the quantum of 500 and 1,000 rupee notes not returning to the formal banking system. Put together, on a conservative basis, these could yield the exchequer at least Rs 1,50,000 crore during the course of 2017-18. That is a big cushion he has secretly kept outside the budget. While the IDS receipts will accrue to direct taxes, the windfall due to demonetisation will flow into the non-tax revenue kitty of the government. In addition to this, there will be deposits into the Pradhan Mantri Garib Kalyan Yojana, an interest-free source of debt available to the government for a four-year period. These sums will be available to the government for any additional expenditure during the course of 2017-18, and also give Jaitley the confidence to meet the fiscal deficit target of 3.2 per cent of the GDP for the next year.

In other words, the government’s books will provide it considerable leeway to present a grandiose pre-election budget. The UPA government did it in the 2013-14 budget by increasing the total spend by a phenomenal 16.38 per cent. This year, Jaitley chose not to invoke the escape clause provided for in the Fiscal Responsibility and Budget Management committee report that allows him to exceed the deficit target by 0.5 per cent of the GDP in 2017-18. But people’s expectations will be different next year. Jaitley has armed himself in this budget to present a “feel-good” budget ahead of 2019’s Lok Sabha elections.

pv.iyer@expressindia.com