Finmin secretaries should've been more careful with revenue projections

Projecting realistic Budget numbers is as important as taking steps to revive the economy

The advent of Narendra Modi at the Centre as prime minister in 2014 was expected to herald a change in the way top civil servants in different central ministries were functioning. Modi’s style of administration was different from that of his predecessor, Manmohan Singh. Modi was also seen as a more demanding boss than Singh.

So, what has changed for the secretaries in key central ministries in the last few years that Modi has been at the helm? A change that is easily noticeable pertains to the influence and role that the prime minister has been enjoying in the appointment of secretaries in important ministries. As a result, many central ministries would be headed by secretaries, who have been either hand-picked by Modi or with whom he has full understanding and, in some cases even prior working relationship.

This is in sharp contrast to how Singh allowed the top secretaries to be appointed in central ministries. The final approval of course came from Singh, but the ministers in charge of the ministries often had a bigger role to play in such appointments. Thus, Pranab Mukherjee as finance minister could have a veto on who should become the finance secretary. Singh would let the ministers have the final word.

An obvious corollary of this contrasting style of managing the appointment of secretaries is too evident to be ignored. While Singh often had difficulty in ensuring quick implementation of his agenda for action (the secretaries were more beholden to their ministers in charge than the PM), Modi is in full command and is supposed to have got things done through direct contact with the secretaries and often when the ministers in charge have not been fully in the loop.

In short, the Prime Minister’s Office (PMO) has become more powerful under Modi and the ministers have had reasons to believe that their secretaries’ loyalty is not just to them but also to the PMO and in particular, the prime minister. That impression has got further strengthened when Modi would hold meetings of secretaries in small as well as large groups and discuss with them their work, even though not all the ministers, to whom those secretaries reported, have been present at such gatherings.

 

Has this equation affected the responsiveness and effectiveness of Modi’s ministers? There are no clear trends. Nor can anybody claim with absolute certainty that the reducing role of ministers in the appointment of secretaries in their respective ministries has led to a dilution in the influence of the ministers over their secretaries. But questions have often arisen over how the principle of accountability of secretaries has taken a hit.

Recent developments pertaining to the finance ministry are worth noting in this context. The Union Budget for 2020-21 was presented on February 1. The secretaries in the finance ministry, involved in the preparation of the revenue estimates often in close cooperation and consultation with the PMO, must have had access to the tax collection trends at least till the first half of January. As the numbers released by the Controller General of Accounts (CGA) show, the net tax collections for the Centre were estimated at Rs 9.05 trillion at the end of December and Rs 9.98 trillion at the end of January. Yet, a net tax revenue number of Rs 15.04 trillion for the entire year of 2019-20 was presented in the Budget.

If tax collection estimates do not look real, a host of associated problems arises. Shouldn’t the secretaries in the finance ministry have been more alert and careful in presenting revenue numbers that are realistic? If the actual tax collection numbers for 2019-20 turn out to be even lower than what were given out in the revised estimate, this will be the second consecutive year when such sharp variations will have taken place. Where is the accountability of the secretaries? Remember that one of the secretaries, who was involved in such overestimation last year, is among the first critics questioning the feasibility of achieving the revenue numbers this year.

Similarly, doubts have arisen over the numbers on disinvestment and subsidies. Disinvestment proceeds in 2019-20 were originally estimated at Rs 1.05 trillion. In the revised estimate, these were scaled down to Rs 65,000 crore. And till the end of February 2020, the government had collected only about Rs 33,000 crore by way of disinvestment.

On major subsidies in 2019-20, the total expenditure was scaled down from Rs 3 trillion in the Budget estimate to Rs 2.27 trillion in the revised estimate. But the CGA’s provisional numbers show that the government has already spent Rs 2.63 trillion under this head by the end of January. So, in addition to a further tax collection shortfall, will the 2019-20 numbers on disinvestment see a bigger shortfall and will the subsidies expenditure exceed the revised estimate? And, should the PMO, which was fully engaged with the finance ministry bureaucrats when the Budget was prepared, review the entire process so that these numbers start looking realistic? Projecting realistic Budget numbers is no less important than taking measures to revive the economy.